[Federal Register Volume 60, Number 189 (Friday, September 29, 1995)] [Rules and Regulations] [Pages 50774-50800] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 95-24216] [[Page 50773]] _______________________________________________________________________ Part XII Department of Education _______________________________________________________________________ 34 CFR Part 218 et al. _______________________________________________________________________ Impact Aid Program; Final Rule Federal Register / Vol. 60, No. 189 / Friday, September 29, 1995 / Rules and Regulations [[Page 50774]] DEPARTMENT OF EDUCATION 34 CFR Parts 218, 219, 221, 222, and 223 RIN 1810-AA80 Impact Aid Program AGENCY: Department of Education ACTION: Final regulations. ----------------------------------------------------------------------- SUMMARY: The Secretary issues these final regulations governing the Impact Aid Program under title VIII of the Elementary and Secondary Education Act of 1965, as amended by the Improving America's Schools Act of 1994. The program, in general, provides assistance for maintenance and operations costs to local educational agencies (LEAs) that are affected by Federal activities. These final regulations implement changes from the previous Impact Aid laws, Public Law 81-874 and Public Law 81-815, which were repealed when title VIII of the Elementary and Secondary Education Act was enacted, and replace the regulations currently found at 34 CFR parts 218, 219, 221, 222, and 223. EFFECTIVE DATE: These regulations take effect October 30, 1995. FOR FURTHER INFORMATION CONTACT: Catherine Schagh, U.S. Department of Education, 600 Independence Avenue, SW, Room 4200 Portals Building, Washington, DC 20202-6244. Telephone: (202) 260-3907. Individuals who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8 p.m., Eastern time, Monday through Friday. SUPPLEMENTARY INFORMATION: The 1994 reauthorization of the Elementary and Secondary Education Act of 1965 (ESEA) revised many Federal elementary and secondary education programs, including the Impact Aid Program. Under that program, assistance is provided for maintenance and operations costs to LEAs affected by Federal activities, including the presence of tax-exempt Federal property and an increased student population due to Federal property ownership or activities. The final regulations in this document implement many of the changes made by these amendments and are being published to clarify the operation of title VIII of the ESEA (referred to in these regulations as ``the Act'') for grantees. These final regulations also implement a change made by an amendment to the General Education Provisions Act (GEPA). In addition, on March 4, 1995, President Clinton announced the Regulatory Reinvention Initiative, which directed heads of Federal departments and agencies to review all existing regulations to eliminate those that are outdated and modify others to increase flexibility and reduce burden. The Department has undertaken a thorough review of the existing Impact Aid Program regulations in light of this initiative. As a part of that process, the Secretary in this final regulation has removed regulations that are obsolete due to changes made in the statute by the Improving America's Schools Act of 1994 (IASA), or that are unnecessary due to the fact that they simply repeated statutory provisions. In addition, the Secretary has reorganized, streamlined, and revised the remaining regulations so that they are more logically organized, clearly stated, and easier to use. In that process, five parts have been reduced to one; and the codified pages of Impact Aid regulations have been reduced by more than 50 percent. These reductions are due primarily to changes made by the IASA, which removed several portions of the Impact Aid Program (e.g., the disaster assistance program, previously codified in part 219, and much of the school construction program, previously codified in part 221), and to the consolidation and streamlining of remaining provisions. Except where changes were necessary to conform the previous regulations to the new Impact Aid law (title VIII of the ESEA), and for a few minor procedural changes, these final regulations contain the same substantive provisions as in the previous regulations. The Secretary intends to publish a notice of proposed rulemaking (NPRM) in the near future to implement a few provisions in the new law that are not included in these final regulations, and to make any substantive changes that have been identified as needed under the Secretary's reinvention review. General (Subpart A) Subpart A has been reorganized to include all of the Impact Aid regulations with general applicability. These regulations previously were in subparts A, B, C, E, and I of part 222. Sec. 222.2 What definitions apply to this part? The following program-specific definitions have been removed as unnecessary: Arrangements, County, Current expenditures, Current fiscal year of the local educational agency, Entitlement, Parent-pupil survey (incorporated into Sec. 222.35), Prorated entitlement, and School year. The remaining definitions in this section are generally applicable to all of part 222. In Sec. 222.2(a)(1), the Secretary lists eight terms defined in section 8013 of the ESEA that are used as defined in that section. The Secretary has clarified the meanings of the remaining five terms in section 8013 as follows: ``Federal property,'' ``Local educational agency,'' and ``Revenues derived from local sources'' are found in Sec. 222.2(c); and ``Free public education'' is found in Sec. 222.30 (as indicated in Sec. 222.2(a)(2)). Sec. 222.10 How long must a local educational agency retain records? The Department-wide record retention requirement in section 443(a) (previously section 437(a)) of the GEPA was amended by the IASA to reduce the period during which recipients must retain records from five to three years. This change is implemented for the Impact Aid Program in Sec. 222.10, which provides that an LEA now must keep its records until the later of three years after the last payment it receives for a fiscal year, or resolution of any pending audit or review and any resulting payment adjustments. Payments for Federal Property Under Section 8002 of the Act (Subpart B) The regulations in subpart B implement section 8002 of the ESEA, previously section 2 of Pub. L. 81-874. These regulations, which have been substantially streamlined by removing payment and obsolete provisions, previously were in subpart J of part 222. Sec. 222.21 What requirements must a local educational agency meet concerning Federal acquisition of real property within the local educational agency? The general ten percent eligibility standard in section 8002 of the ESEA (generally requiring federally owned property acquired since 1938 to comprise at least ten percent of the LEA's aggregate assessed value as of the time of acquisition) was expanded by the ESEA under limited circumstances. Section 222.21(a)(1)(ii) implements the expanded standard in section 8002(a)(1)(C)(ii) of the ESEA concerning the assessed value that is used for the purpose of determining eligibility under section 8002(a)(1). That new standard provides that, under certain specific circumstances, the assessed value used for that eligibility test may be the assessed value in the first year preceding or succeeding Federal acquisition, whichever is greater, rather than the assessed value for the year of Federal acquisition as generally required. Section 222.21(a)(2) incorporates the expanded eligibility standard in section 8002(e), allowing certain additional districts containing Forest Service property to qualify under the ten percent standard if they have between 20,000 and 60,000 acres of Forest Service land (rather than 50,000-55,000 acres as previously was required), and their counties were chartered either in [[Page 50775]] 1875 or 1890 (rather than in 1875 only as previously required). Sec. 222.22 How does the Secretary treat compensation from Federal activities for purposes of determining eligibility and payments? Section 8002(a)(2) of the ESEA retained a second eligibility standard, which provides that an LEA may not receive a payment under section 8002 if it is otherwise substantially compensated through Federal activities related to the Federal property. This standard is implemented in Sec. 222.22(a), which clarifies that the Secretary will base the application of this standard upon the revenues that an LEA receives from the Federal activities during the previous fiscal year, rather than during the current year as previously occurred. This change is consistent with the new payment provision in section 8002(b)(1) of the ESEA, under which these revenues for the previous year must be deducted from the amount that an LEA otherwise would be paid under section 8002. In addition, Sec. 222.22(b) clarifies that the lack of substantial compensation standard will be met only if the revenues received the preceding year do not equal or exceed the maximum payment amount under section 8002(b) of the ESEA. This is changed from the current regulations, under which the revenues may not equal or exceed the ``need-based'' entitlement amount. This change is necessary because the need-based entitlement has been removed from the statute as a basis for payment. Payments for Federally Connected Children Under Section 8003(b) and (e) of the Act (Subpart C) The regulations in subpart C implement the basic payment provisions for federally connected children under section 8003 of the ESEA, including the provisions in section 8003(b) for basic support payments. Under these provisions, payments are based upon certain categories of federally connected children. Similar regulatory provisions implementing section 3 of Pub. L. 81-874 previously were in subparts A, C, and D of part 222. Sec. 222.34 If an applicant makes a second membership count, when must that count be made? Basic support payments under section 8003 of the ESEA are based upon the number of federally connected children in average daily attendance (ADA) at an LEA, for whom the LEA provided a free public education during the preceding school year. LEAs determine their number of federally connected children through one or more membership counts during the school year. If an LEA makes a second membership count, it previously has been required to do so during the ``last quarter of the school year.'' Because year-round schools often are not based upon ``quarters,'' Sec. 222.34 has been revised to clarify that if an LEA makes a second membership count, it must do so after January 31 but before May 15. This time period for the optional second membership count is to avoid the double counting of certain military children that could now otherwise occur due to the new statutory provision in section 8006 of the ESEA (payments for sudden and substantial increases of eligible children beginning with May 15). Sec. 222.35 How does a local educational agency count the membership of its federally connected children? Membership counts are made by LEAs either through a parent-pupil survey or a source check, or both. Section 222.35 explains what information must be obtained in a parent-pupil survey and a source check. The Secretary removes the previous requirement that an LEA obtain the name of each child's teacher on the parent-pupil survey form because it is unnecessary. Sec. 222.36 What minimum number of federally connected children must a local educational agency have to receive a payment on behalf of those children under section 8003(b) and (e)? Sections 8003(a)(3) and (b)(1)(B) of the ESEA establish minimum thresholds for the number of federally connected children that an LEA must have to receive a payment under section 8003 (except for a hold harmless payment under section 8003(e) for fiscal year 1995). Section 222.36, which implements these provisions, clarifies that if an LEA does not have the minimum number of federally connected children described in section 8003(a)(1)(F) or (G) (federally connected children who either reside on or whose parents are employed on Federal property, but not both) necessary to meet the special rule described in section 8003(a)(3), those children are not counted for the purpose of section 8003 payments, or in determining whether the LEA meets the minimum threshold under section 8003(b)(1)(B). Sec. 222.38 What is the maximum basic support payment that a local educational agency may receive under section 8003(b)? Section 222.38 describes the maximum basic support payment that an LEA may receive under section 8003(b)(1)(C) of the ESEA. Sec. 222.39 How does a State educational agency identify generally comparable local educational agencies for local contribution rate purposes? Sec. 222.40 How does a local educational agency select a local contribution rate based on generally comparable local educational agencies? Sec. 222.41 How does a State educational agency compute local contribution rates based upon generally comparable local educational agencies? Section 8003(b)(1)(C)(iii) of the ESEA establishes that one of the factors upon which an LEA's maximum basic support amount may be based is a local contribution rate (LCR) based on generally comparable LEAs as determined under the regulations implementing Public Law 81-874 that were in effect on January 1, 1994. Although the Secretary has revised Secs. 222.39-222.41 slightly for clarity and to make necessary technical changes consistent with the reauthorized statute, those regulations retain the regulatory method for determining LCRs that was in effect on January 1, 1994. Under those regulations, the term ``heavily impacted LEA'' is changed to ``significantly impacted LEA'' to avoid confusion with the section 8003(f) ``heavily impacted'' LEAs, which include LEAs with different characteristics. Under these amended regulations, ``significantly impacted'' is limited to two types of LEAs: (1) any LEA having 20 percent or more of its ADA composed of children described under section 3(a) of Public Law 81-874 (now described under section 8003(a)(1)(A)-(C) of the ESEA); and (2) any LEA having 50 percent or more of its ADA composed of children described under both sections 3(a) and (b) of Public Law 81-874 (now described under section 8003(a)(1)(A)-(G) of the ESEA). The Secretary revises the previous regulations to provide that LCRs are computed based upon data from the third fiscal year preceding the fiscal year for which the LCR is computed, rather than from the second preceding fiscal year as in the previous regulations. This change is based upon section 8003(c) of the ESEA, which specifies that basic support payments are based upon one year older data than were used when the previous LCR regulations initially were adopted. Payments Under Section 8003(d) of the Act for Local Educational Agencies That Serve Children with Disabilities (Subpart D) The regulations in subpart D implement the provisions in section 8003(d) of the ESEA governing payments to LEAs that serve certain federally connected children with [[Page 50776]] disabilities. Similar regulatory provisions, implementing section 3(d)(2)(C) of Pub. L. 81-874, previously were in subpart H of part 222. Sec. 222.50 What definitions apply to this subpart? The following definitions in the Individuals with Disabilities Education Act or its implementing regulations, or in 34 CFR Sec. 77.1, have been added to this section: ``children with specific learning disabilities,'' ``individualized education program,'' ``intermediate educational unit,'' ``preschool,'' and ``special education.'' These definitions currently apply to Impact Aid payments for federally connected children with disabilities, but the full definitions were not included in the previous regulations. Because these terms are used in the text of the regulations and recipients of section 8003(d) funds are subject to them, the full text of the definitions are now included in the regulations for the convenience of applicant LEAs and other readers. Sec. 222.51 Which children may a local educational agency count for payment under section 8003(d)? Section 222.51 implements section 8003(d)(1) of the ESEA, which provides for payments based upon certain categories of federally connected children with disabilities. Previously, only federally connected children with disabilities who had parents on active duty in the uniformed services or who resided on Indian lands were eligible to be counted for an additional payment to an LEA. Under section 8003(d)(1), those two categories of federally connected children with disabilities, as well as children with parents who are foreign military officers, may be counted by an LEA. Under the previous statute (Pub. L. 81-874), all LEAs received a percentage increase in payment for each federally connected child with disabilities served by the schools within the LEA. Under section 8003(d), a separate appropriation is provided for payments for children with disabilities and weights are assigned to the different types of eligible children. For children with parents on active duty in the uniformed services or foreign military parents but who do not reside on Federal property, an LEA receives one half of the amount that it receives for the other categories of eligible federally connected children with disabilities. Additional Assistance for Heavily Impacted Local Educational Agencies under Section 8003(f) of the Act (Subpart E) The regulations in subpart E implement the provisions of section 8003(f) of the ESEA, which provides additional assistance to certain heavily impacted LEAs. Although section 8003(f) is similar to section 3(d)(2)(B) of Public Law 81-874, there are several significant additions to this section, including a provision for additional assistance for LEAs affected by unusual geographic factors similar to section 3(d)(3)(B)(ii) of the former law. The regulations implementing these former provisions were previously in subpart K of part 222 and Secs. 222.36 and 222.37, respectively. Sec. 222.62 Which local educational agencies are eligible to apply for an additional payment under section 8003(f)? Section 8003(f) adds several new categories of LEAs that are considered to be heavily impacted and eligible to apply for additional assistance under the section. Section 222.62 describes the primary characteristics of the categories of heavily impacted LEA applicants. Sec. 222.63 What other requirements must a local educational agency meet in order to be eligible for financial assistance under section 8003(f)(2)(A)? Sec. 222.72 How does the Secretary determine a maximum payment for local educational agencies that are eligible for financial assistance under section 8003(f)(2)(A) and Sec. 222.63? Maximum payments for heavily impacted LEAs eligible under section 8003(f)(2)(A) are calculated in accordance with section 8003(f)(3). Section 222.63 specifies the requirements in addition to those in Sec. 222.62(a), (b), or (c) that an LEA must meet in order to be eligible for a payment under section 8003(f)(2)(A). These requirements are similar to requirements for LEAs that applied for section 3(d)(2)(B) assistance under Public Law 81-874, including that the LEA must be making a reasonable tax effort as further described in Secs. 222.66-222.71 and availing itself of all other potential revenues such as State aid. Section 222.72 establishes how payments for LEAs eligible under section 8003(f)(2)(A) are calculated in accordance with the new statutory provisions. Sec. 222.64 What other requirements must a local educational agency meet in order to be eligible for financial assistance under section 8003(f)(2)(B)? Sec. 222.73 How does the Secretary determine a maximum payment for local educational agencies that are eligible for financial assistance under section 8003(f)(2)(B) and Sec. 222.64? Payments for heavily impacted LEAs eligible under section 8003(f)(2)(B) are calculated by increasing the LCR of an eligible LEA if the LEA's current expenditures are affected by unusual geographic factors. Section 222.64 specifies the requirements in addition to those in Sec. 222.62(d) that an LEA must meet in order to be eligible for this type of payment. These requirements are the same as the requirements for LEAs that applied for section 3(d)(3)(B)(ii) assistance under Pub. L. 81-874 and that were in Sec. 222.37 of the former regulations. Like LEAs described in section 8003(f)(2)(A), an eligible LEA under this section also must be making a reasonable tax effort as further described in Secs. 222.66- 222.71 and availing itself of all other potential revenues such as State aid. Section 222.73 establishes how payments for LEAs eligible under section 8003(f)(2)(B) are calculated. Sec. 222.74 How does the Secretary identify generally comparable local educational agencies for purposes of section 8003(f)? Section 8003(f) uses the term ``generally comparable LEAs'' in several different ways. Section 222.74 specifies how the term is generally used throughout these regulations. Section 8003(f)(3)(A)(i) also provides that payments for certain heavily impacted LEAs may be calculated using the average per pupil expenditure of three generally comparable LEAs, and Sec. 222.74 identifies how three generally comparable LEAs are selected when that option is available. This selection method was also available to LEAs under section 3(d)(2)(B) of Public Law 81-874 and was described in Sec. 222.36 of the former Impact Aid regulations. Special Provisions for Local Educational Agencies That Claim Children Residing on Indian Lands (Subpart G) The regulations in subpart G implement the provisions in section 8004 of the ESEA that require an LEA that claims children residing on Indian lands to establish policies and procedures for the equal participation of those children in the LEA's programs and activities supported with Impact Aid funds, and to consult with and afford parents and Indian tribes an opportunity to present their views on those programs and activities. Regulations implementing similar provisions in section 5(b)(3) of Public Law 81-874 previously were in part 223. Previously, the statute did not impose on the Secretary the duty to provide technical assistance to the LEAs and Indian tribes. Section 8004(d) specifically imposes that requirement on the Secretary and gives the Secretary the authority to take various enforcement actions, including withholding payments authorized under [[Page 50777]] section 8003 from LEAs that fail to comply with section 8004(a). Facilities Assistance and Transfers under Section 8008 of the Act (Subpart I) The regulations in subpart I implement the provisions in section 8008 of the ESEA concerning facilities maintenance. Pub. L. 81-815, the former Impact Aid School Construction statute, was repealed as part of the IASA. Under section 10 of Pub. L. 81-815, the Secretary had the authority to make arrangements for ``constructing, leasing, renovating, remodeling, or rehabilitating or otherwise providing'' the minimum school facilities necessary for the education of certain federally connected students for whom such facilities were unavailable. Section 8008 specifies that the Secretary may continue to provide assistance for the school facilities that were supported under section 10 of Public Law 81-815. However, this authority indicates that the Secretary is, as soon as practicable, to transfer to an appropriate LEA or entity the United States' interest in those facilities. Due to these statutory changes, the relevant regulations, Sec. 221.5 and subpart H, which were previously contained in 34 CFR part 221, have been clarified and streamlined, consistent with the more limited authorities in section 8008. Impact Aid Administrative Hearings and Judicial Review under Section 8011 of the Act (Subpart J) The regulations in subpart J implement the provisions in section 8011(a) of the ESEA for administrative review following an adverse action. Regulations implementing a similar administrative review provision in section 5(g) of Pub. L. 81-874 previously were in part 218. This subpart governs all Impact Aid administrative hearings, except Indian policies and procedures hearings (in subpart G) and hearings concerning determinations under section 8009 of the ESEA (in subpart K). In addition, the regulations in this subpart implement section 8011(b) of the ESEA, which changes the forum in which a party must seek judicial review. Under that provision, if a party seeks review of the Secretary's final decision following an administrative hearing proceeding under section 8011(a), that review must be sought in the United States Court of Appeals in the circuit in which the LEA or State is located, rather than in a lower court such as a United States District Court or the Court of Federal Claims as previously occurred. Determinations under Section 8009 of the Act (Subpart K) The regulations in subpart K implement the provisions in section 8009 of the ESEA. Under this section, States are prohibited from considering Impact Aid in the allocation of State aid, except in those cases where the Secretary determines and certifies that the State has in effect a program of State aid that equalizes expenditures for free public education among the State's LEAs. Sections 222.161-222.165 describe the substantive and procedural requirements for States to obtain certification and consider Impact Aid in accordance with section 8009 of the ESEA. Regulations implementing similar provisions in section 5(d) (1) and (2) of Pub. L. 81-874 previously were in subpart G of part 222. Sec. 222.161 How is State aid treated under section 8009 of the Act? Section 8009 of the ESEA contains several changes from the previous law that are implemented by Sec. 222.161. Section 222.161(a)(1)(iv)(4) implements the new requirements in section 8009(b)(1) of the ESEA, under which all States are prohibited from considering Impact Aid before certification by the Secretary. Section 222.161(b) implements the new requirement in section 8009(b)(2)(A) that determinations by the Secretary are to be based on final data for the second fiscal year preceding the fiscal year for which the determination is made if substantially the same program of State aid was then in effect. This regulation also clarifies that, in those cases in which the Secretary determines that the State has substantially revised its State aid program, the Secretary may certify that program for any fiscal year only if the Secretary determines, on the basis of projected data, that the State's program will meet the disparity standard described in Sec. 222.162. The State must also provide an assurance to the Secretary that, if final data do not demonstrate that the State's program met that standard for the fiscal year for which the determination is made, the State will pay to each affected LEA the amount by which the State reduced State aid to the LEA. The regulation requires that data projections submitted by a State must set forth the assumptions upon which the data projections are founded, be accompanied by an assurance as to their accuracy, and be adjusted by actual data for the fiscal year of determination that must be submitted to the Secretary as soon as those data are available. Sec. 222.162 What disparity standard must a State meet in order to be certified and how are disparities in current expenditures or revenues per pupil measured? Section 8009(b)(2) of the ESEA establishes a new, single, statutory standard for eligibility for the consideration of Impact Aid in a State's allocation of State aid. That standard is based upon the allowable disparities in per-pupil revenues or expenditures, under which the range of permissible disparity is 25 percent for fiscal years 1995-97 and 20 percent for fiscal years 1998 and 1999. Section 222.162 reflects these requirements and specifies the method the Secretary will employ to measure the statutory disparity standard. Detailed examples of the application of this method to State funding programs are provided in the Appendix following subpart K. Sec. 222.163 What proportion of funds distributed under the Act may a State take into consideration upon certification? Once a State is certified by the Secretary, section 8009(d) of the ESEA provides that the State may reduce State aid in a limited amount equal to a specified proportion of certain Impact Aid receipts. Specifically, the proportion established by section 8009(d) is the proportion that the local tax revenues covered under the equalization program are of the total local tax revenues attributable to current expenditures for free public education within that agency. Section 222.163 clarifies how the Secretary applies this statutory limitation. Sec. 222.164 What procedures does the Secretary follow in making a determination under section 8009? Section 222.164 specifies the procedures to be followed by the Secretary in making determinations under section 8009. Those procedures include the requirement that a submission by a State seeking certification as equalized must be received by the Secretary no later than 120 calendar days before the beginning of the State's fiscal year for the year of the determination. The submission must include final second preceding fiscal year disparity data (except as provided in Sec. 222.161(b)(2)) enabling the Secretary to determine whether the State qualifies. This regulation also provides that, before making a determination under section 8009, the Secretary will afford the State, and all LEAs in the State, an opportunity to present their views to the Department. [[Page 50778]] Sec. 222.165 What procedures does the Secretary follow after making a determination under section 8009? Section 222.165 describes the procedures for administrative appeals of determinations by the Secretary and the procedures for corrective actions by States. Waiver of Proposed Rulemaking In accordance with the Administrative Procedure Act (5 U.S.C. 553), it is the Secretary's practice to offer interested parties the opportunity to comment on proposed regulations. However, these regulations merely reflect statutory changes, remove unnecessary and obsolete regulatory provisions, reorganize and clarify the language of the regulations, and make minor procedural revisions. Thus, the regulations do not establish or affect substantive policy. Therefore, the Secretary has determined with respect to amendments made due to statutory changes that, pursuant to 5 U.S.C. 553(b)(B), publication of a proposed rule is unnecessary and contrary to the public interest, and with respect to the procedural changes that, pursuant to 5 U.S.C. 553(b)(A), public comment is not required. Regulatory Flexibility Act Certification The Secretary certifies that these regulations would not have a significant economic impact on a substantial number of small entities. The small entities that would be affected by these regulations are small LEAs receiving Federal funds under this program. However, the regulations would not have a significant economic impact on the small LEAs affected because the regulations will not impose excessive regulatory burdens or require unnecessary Federal supervision. The regulations would impose minimal requirements to ensure the proper expenditure of program funds. List of Subjects in Part 222 Education, Education of children with disabilities, Elementary and secondary education, Federally affected areas, Grant programs-- education, Indians--education, Public housing, Reports and recordkeeping requirements, School construction. 34 CFR Part 218 Education, Elementary and secondary education, Federally affected areas, Grant programs--education. 34 CFR Part 219 Education, Elementary and secondary education, Federally affected areas, Grant programs--education, Reports and recordkeeping requirements, School construction. 34 CFR Parts 221 and 222 Education, Elementary and secondary education, Federally affected areas, Grant programs--education, Reports and recordkeeping requirements, School construction. 34 CFR Part 223 Education, Elementary and secondary education, Federally affected areas, Grant programs--education, Indians--education. Dated: September 25, 1995. Thomas W. Payzant, Assistant Secretary for Elementary and Secondary Education. (Catalog of Federal Domestic Assistance Number 84.041, Impact Aid-- Maintenance and Operations) For the reasons set out in the preamble and under the authority at 20 U.S.C. 7701-7714, the Secretary amends chapter II of title 34 of the Code of Federal Regulations as follows: Part 218 [Removed] 1.Part 218 is removed. Part 219 [Removed] 2. Part 219 is removed. Part 221 [Removed] 3. Part 221 is removed. Part 223 [Removed] 4. Part 223 is removed. 5. Part 222 is revised to read as follows: PART 222--IMPACT AID PROGRAMS Subpart A--General Sec. 222.1 What is the scope of this part? 222.2 What definitions apply to this part? 222.3 How does a local educational agency apply for assistance under section 8002 or 8003 of the Act? 222.4 How does the Secretary determine when an application is timely filed? 222.5 When may a local educational agency amend its application? 222.6 Which applications does the Secretary accept? 222.7 What information may a local educational agency submit after the application deadline? 222.8 What action must an applicant take upon a change in its boundary, classification, control, governing authority, or identity? 222.9 What records must a local educational agency maintain? 222.10 How long must a local educational agency retain records? 222.11 How does the Secretary recover overpayments? 222.12 [Reserved] 222.13 What other statutes and regulations apply to this part? 222.14-222.19 [Reserved] Subpart B--Payments for Federal Property under Section 8002 of the Act 222.20 What definitions apply to this subpart? 222.21 What requirements must a local educational agency meet concerning Federal acquisition of real property within the local educational agency? 222.22 How does the Secretary treat compensation from Federal activities for purposes of determining eligibility and payments? 222.23-222.29 [Reserved] Subpart C--Payments for Federally Connected Children under Section 8003(b) and (e) of the Act 222.30 What is ``free public education''? 222.31 To which local educational agencies does the Secretary make basic support payments under section 8003(b) of the Act? 222.32 Upon what information is a local educational agency's basic support payment based? 222.33 When must an applicant make its first or only membership count? 222.34 If an applicant makes a second membership count, when must that count be made? 222.35 How does a local educational agency count the membership of its federally connected children? 222.36 What minimum number of federally connected children must a local educational agency have to receive a payment on behalf of those children under section 8003(b) and (e)? 222.37 How does the Secretary calculate the average daily attendance of federally connected children? 222.38 What is the maximum basic support payment that a local educational agency may receive under section 8003(b)? 222.39 How does a State educational agency identify generally comparable local educational agencies for local contribution rate purposes? 222.40 How does a local educational agency select a local contribution rate based on generally comparable local educational agencies? 222.41 How does a State educational agency compute local contribution rates based upon generally comparable local educational agencies? 222.42-222.49 [Reserved] Subpart D--Payments under Section 8003(d) of the Act for Local Educational Agencies That Serve Children with Disabilities 222.50 What definitions apply to this subpart? 222.51 Which children may a local educational agency count for payment under section 8003(d) of the Act? 222.52 What requirements must a local educational agency meet to receive a payment under section 8003(d)? 222.53 What restrictions and requirements apply to the use of funds provided under section 8003(d)? 222.54 What supplement-not-supplant requirement applies to this subpart? 222.55 What other statutes and regulations are applicable to this subpart? 222.56-222.59 [Reserved] [[Page 50779]] Subpart E--Additional Assistance for Heavily Impacted Local Educational Agencies under Section 8003(f) of the Act 222.60 What are the scope and purpose of these regulations? 222.61 What data are used to determine a local educational agency's eligibility and payment under section 8003(f) of the Act? 222.62 Which local educational agencies are eligible to apply for an additional payment under section 8003(f)? 222.63 What other requirements must a local educational agency meet in order to be eligible for financial assistance under section 8003(f)(2)(A)? 222.64 What other requirements must a local educational agency meet in order to be eligible for financial assistance under section 8003(f)(2)(B)? 222.65 How may a State aid program affect a local educational agency's eligibility for assistance under section 8003(f)? 222.66 How does the Secretary determine whether a fiscally independent local educational agency is making a reasonable tax effort? 222.67 What tax rates does the Secretary use if real property is assessed at different percentages of true value? 222.68 What tax rates does the Secretary use if two or more different classifications of real property are taxed at different rates? 222.69 What tax rates may the Secretary use if substantial local revenues are derived from local tax sources other than real property taxes? 222.70 How does the Secretary determine whether a fiscally dependent local educational agency is making a reasonable tax effort? 222.71 What information must be provided by the State educational agency? 222.72 How does the Secretary determine a maximum payment for local educational agencies that are eligible for financial assistance under section 8003(f)(2)(A) and Sec. 222.63? 222.73 How does the Secretary determine a maximum payment for local educational agencies that are eligible for financial assistance under section 8003(f)(2)(B) and Sec. 222.64? 222.74 How does the Secretary identify generally comparable local educational agencies for purposes of section 8003(f)? 222.75 How does the Secretary compute the average per pupil expenditure of generally comparable local educational agencies under this subpart? 222.76 What does the Secretary do if appropriation levels are insufficient to pay in full the amounts calculated under Secs. 222.72 and 222.73? 222.77-222.79 [Reserved] Subpart F--[Reserved] Subpart G--Special Provisions for Local Educational Agencies that Claim Children Residing on Indian Lands General 222.90 What definitions apply to this subpart? 222.91 What requirements must a local educational agency meet to receive a payment under section 8003 of the Act for children residing on Indian lands? 222.92 What additional statutes and regulations apply to this subpart? 222.93 [Reserved] Indian Policies and Procedures 222.94 What provisions must be included in a local educational agency's Indian policies and procedures? 222.95 How are Indian policies and procedures reviewed to ensure compliance with the requirements in section 8004(a) of the Act? 222.96-222.101 [Reserved] Indian Policies and Procedures Complaint and Hearing Procedures 222.102 Who may file a complaint about a local educational agency's Indian policies and procedures? 222.103 What must be included in a complaint? 222.104 When does the Assistant Secretary consider a complaint received? 222.105-222.107 [Reserved] 222.108 What actions must be taken upon receipt of a complaint? 222.109 When may a local educational agency reply to a complaint? 222.110 What are the procedures for conducting a hearing on a local educational agency's Indian policies and procedures? 222.111 What is the authority of the hearing examiner in conducting a hearing? 222.112 What procedures are followed after the hearing? 222.113 What are the responsibilities of the Assistant Secretary after the hearing? 222.114-222.129 [Reserved] Subpart H--[Reserved] Subpart I--Facilities Assistance and Transfers under Section 8008 of the Act 222.140 What definitions apply to this subpart? 222.141 For what types of projects may the Secretary provide assistance under section 8008 of the Act? 222.142 What terms and conditions apply to minimum school facilities operated under section 8008 by another agency? 222.143 What terms and conditions apply to the transfer of minimum school facilities? 222.144-222.149 [Reserved] Subpart J--Impact Aid Administrative Hearings and Judicial Review under Section 8011 of the Act 222.150 What is the scope of this subpart? 222.151 When is an administrative hearing provided to a local educational agency? 222.152 When may a local educational agency request reconsideration of a determination? 222.153 How must a local educational agency request an administrative hearing? 222.154 How must written submissions under this subpart be filed? 222.155 When and where is an administrative hearing held? 222.156 How is an administrative hearing conducted? 222.157 What procedures apply for issuing or appealing an administrative law judge's decision under section 8011(a) of the Act? 222.158 What procedures apply to the Secretary's review of an initial decision or certified record? 222.159 When and where does a party seek judicial review? Subpart K--Determinations under Section 8009 of the Act 222.160 What are the scope and purpose of this subpart? 222.161 How is State aid treated under section 8009 of the Act? 222.162 What disparity standard must a State meet in order to be certified and how are disparities in current expenditures or revenues per pupil measured? 222.163 What proportion of Impact Aid funds may a State take into consideration upon certification? 222.164 What procedures does the Secretary follow in making a determination under section 8009? 222.165 What procedures does the Secretary follow after making a determination under section 8009? 222.166-222.169 [Reserved] Appendix to Subpart K--Determinations Under Section 8009 of the Act-- Methods of Calculations for Treatment of Impact Aid Payments under State Equalization Programs Authority: 20 U.S.C. 7701-7714, unless otherwise noted. Subpart A--General Sec. 222.1 What is the scope of this part? The regulations in this part govern the provision of financial assistance under title VIII of the Elementary and Secondary Education Act of 1965 (ESEA) to local educational agencies (LEAs) in areas affected by Federal activities. (Authority: 20 U.S.C. 7701-7714) Sec. 222.2 What definitions apply to this part? (a)(1) The following terms defined in section 8013 of the Act apply to this part: Armed forces Average per-pupil expenditure Construction Current expenditures Indian lands Local contribution percentage Low-rent housing School facilities (2) The following term defined in Sec. 222.30 applies to this part: Free public education (b) The following terms defined in section 14101 of the ESEA (General Provisions) also apply to this part: Average daily attendance (ADA) Child County Department Outlying area Parent [[Page 50780]] Secretary State State educational agency (SEA) (c) In addition, the following definitions apply to this part: Act means title VIII of the Elementary and Secondary Education Act of 1965 (ESEA), as amended. Applicant means any LEA that files an application for financial assistance under section 8002, 8003, or 8006 of the Act and the regulations in this part implementing those provisions. Except as provided in section 8005(d)(4) of the Act, an SEA may be an applicant for assistance under section 8003 only if the SEA directly operates and maintains facilities for providing free public education for the children it claims in its application. (Authority: 20 U.S.C. 7705 and 7713(9)) Application means a complete and signed application in the form approved by the Secretary, filed by an applicant. (Authority: 20 U.S.C. 7705) Federally connected children means children described in sections 8003(a)(1) and 8010(c)(2) of the Act. (Authority: 20 U.S.C. 7703(a)(1) and 7710(c)(2)) Federal property. (1) The term means-- (i) Federal property described in section 8013; and (ii) Ships that are owned by the United States and whose home ports are located upon Federal property described in this definition. (2) Notwithstanding paragraph (1) of this definition, for the purpose of section 8002 the term does not include-- (i) Any real property that the United States does not own in fee simple, except for Indian lands described in section 8013(7), and transferred property described in section 8002(d); and (ii) Real property described in section 8002(c) (real property with respect to which payments are being made under section 13 of the Tennessee Valley Authority Act of 1933). (Authority: 20 U.S.C. 7702(c) and (d), and 7713(5) and (7)) Fiscally dependent LEA means an LEA that does not have the final authority to determine the amount of revenue to be raised from local sources for current expenditure purposes. (Authority: 20 U.S.C. 7702(b)(2) and 7703(f)) Fiscally independent LEA means an LEA that has the final authority to determine the amount of revenue to be raised from local sources for current expenditure purposes within the limits established by State law. (Authority: 20 U.S.C. 7702(b)(2) and 7703(f)) Local educational agency (LEA) is defined in section 8013(9). Except for an SEA qualifying under section 8005(d)(4), the term includes an SEA only so long as-- (1) The SEA directly operates and maintains the facilities for providing free public education for the children it claims in its application; (2) The children claimed by the SEA actually are attending those State-operated facilities; and (3) The SEA does not, through a tuition arrangement, contract, or by any other means, pay another entity to operate and maintain facilities for those children. (Authority: 20 U.S.C. 7705(d)(4) and 7713(9)) Local real property tax rate for current expenditure purposes. (1) For a fiscally independent LEA, the term means the entire tax levied on real property within the LEA, if all but a de minimus amount of the total proceeds from the tax levy are available to that LEA for current expenditures (as defined in section 8013). (2) For a fiscally dependent LEA, the term means the following: (i) The entire tax levied by the general government on real property if all but a de minimus amount of the total proceeds from that tax levy are available to the LEA for current expenditures (as defined in section 8013); (ii) That portion of a local real property tax rate designated by the general government for current expenditure purposes (as defined in section 8013); or (iii) If no real property tax levied by the general government meets the criteria in paragraphs (2)(i) or (ii) of this definition, an imputed tax rate that the Secretary determines by-- (A) Dividing the total local real property tax revenue available for current expenditures of the general government by the total revenue from all local sources available for current expenditures of the general government; (B) Multiplying the figure obtained in paragraph (2)(iii)(A) of this definition by the revenue received by the LEA for current expenditures (as defined in section 8013) from the general government; and (C) Dividing the figure obtained in paragraph (2)(iii)(B) of this definition by the total current actual assessed value of all real property in the district. (3) The term does not include any portion of a tax or revenue that is restricted to or dedicated for any specific purpose other than current expenditures (as defined in section 8013). (Authority: 20 U.S.C. 7702(b)(2) and 7703(f)) Membership means the following: (1)(i) The definition given to the term by State law; or (ii) If State law does not define the term, the number of children listed on an LEA's current enrollment records on its survey date(s). (2) The term includes children for whom the applicant is responsible for providing a free public education, but who are attending schools other than those operated by the applicant under a tuition arrangement described in paragraph (4) of the definition of ``free public education'' in Sec. 222.30. (3) The term does not include children who-- (i) Have never attended classes in schools of the LEA or of another educational entity with which the LEA has a tuition arrangement; (ii) Have permanently left the LEA; (iii) Otherwise have become ineligible to attend classes there; or (iv) Attend the schools of the applicant LEA under a tuition arrangement with another LEA that is responsible for providing them a free public education. (Authority: 20 U.S.C. 7703 and 8801(1)) Parent employed on Federal property. (1) The term means the following: (i) An employee of the Federal Government who reports to work on, or whose place of work is located on, Federal property. (ii) A person not employed by the Federal Government but who spends more than 50 percent of his or her working time on Federal property (whether as an employee or self-employed) when engaged in farming, grazing, lumbering, mining, or other operations that are authorized by the Federal Government, through a lease or other arrangement, to be carried out entirely or partly on Federal property. (iii) A proportion, to be determined by the Secretary, based on persons working on commingled Federal and non-Federal properties other than those persons covered under paragraph (1)(ii) of this definition. (2) The term does not include a person who reports to work at a work station not on Federal property but spends more than 50 percent of his working time on Federal property providing services to operations or activities authorized to be carried out on Federal property. (Authority: 20 U.S.C. 7701 and 7703) Real property. (1) The term means-- (i) Land; and (ii) Improvements (such as buildings and appurtenances to those buildings, railroad lines, utility lines, pipelines, and other permanent fixtures), except as provided in paragraph (2). (2) The term does not include-- (i) Improvements that are classified as personal property under State law; or (ii) Equipment and movable machinery, such as motor vehicles, movable house trailers, farm machinery, rolling railroad stock, and floating dry [[Page 50781]] docks, unless that equipment or movable machinery is classified as real property or subject to local real property taxation under State law. (Authority: 20 U.S.C. 7702 and 7713(5)) Revenues derived from local sources. (1) The term means-- (i) Tax funds derived from real estate; and (ii) Other taxes or receipts that are received from the county, and any other local tax or miscellaneous receipts. (2)(i) For the purpose of paragraph (1)(i) of this definition, the term ``tax funds derived from real estate'' means-- (A) Locally received funds that are derived from local taxation of real property; (B) Tax funds that are received on account of Wherry-Spence housing projects (12 U.S.C. 1702 et seq.) located on private property; and (C) All local real property tax funds that are received from either the county or the State, serving as a collecting agency, and that are returned to the LEA for expenditure by that agency. (ii) The term does not include-- (A) Any payments under this Act or the Johnson-O'Malley Act (25 U.S.C. 452); (B) Tax payments that are received on account of Wherry-Spence housing projects located on federally owned property; or (C) Local real property tax funds that are received by the State and distributed to LEAs on a per-pupil or formula basis. (Authority: 20 U.S.C. 7713(11)) State aid means any contribution, no repayment of which is expected, made by a State to or on behalf of an LEA within the State for the support of free public education. (Authority: 20 U.S.C. 7703) Uniformed services means the United States Army, Navy, Air Force, Marine Corps, Coast Guard, National Oceanic and Atmospheric Administration, and Public Health Service. (Approved by the Office of Management and Budget under control number 1810-0036). (Authority: 20 U.S.C. 7703(a)(1); 37 U.S.C. 101) Sec. 222.3 How does a local educational agency apply for assistance under section 8002 or 8003 of the Act? An LEA must meet the following application requirements to be considered for a payment under section 8002 or 8003: (a) Except as provided in paragraphs (b) and (d) of this section, on or before January 31 of the fiscal year for which the LEA seeks assistance under section 8002, or the fiscal year preceding the fiscal year for which the LEA seeks assistance under section 8003, the LEA must-- (1) File with the Secretary a complete and signed application for payment under section 8002 or 8003; and (2) Certify to the Secretary that it will file, and file, a copy of the application referred to in paragraph (a) of this section with its SEA. (b)(1) If any of the following events that give rise to eligibility for payment occur after the filing deadline in paragraph (a)(1) of this section, an LEA must file a complete and signed application within the time limits required by paragraph (b)(2) of this section: (i) The United States Government initiates or reactivates a Federal activity, or acquires real property. (ii) The United States Congress enacts new legislation. (iii) A reorganization of school districts takes place. (iv) Property, previously determined by the Secretary not to be Federal property, is determined in writing by the Secretary to be Federal property. (2) Except as provided in paragraph (d) of this section, within 60 days after the applicable event occurs but not later than September 30 of the fiscal year for which the LEA seeks assistance under section 8002, or of the fiscal year preceding the fiscal year for which the LEA seeks assistance under section 8003, the LEA must-- (i) File an application, as permitted by paragraph (b)(1) of this section, with the Secretary; and (ii) File a copy of that application with its SEA. (c)(1) If the SEA wishes to notify the Secretary of any inconsistencies or other concerns with an LEA's application, the SEA must do so-- (i) For an application subject to the filing deadlines in paragraph (a)(1) of this section, on or before February 15 of the fiscal year for which the LEA seeks assistance under section 8002, or of the fiscal year preceding the fiscal year for which the LEA seeks assistance under section 8003; and (ii) On or before fifteen days following the date by which an application subject to the filing deadlines in paragraph (b) of this section must be filed. (2) The Secretary does not process for payment a timely filed application until any concerns timely raised by the SEA are resolved. If the Secretary does not receive comments or notification from the SEA by the applicable deadline set forth in paragraph (c)(1) of this section, the Secretary assumes that the data and statements in the application are, to the best of the SEA's knowledge, true, complete, and correct. (d) If a filing date in this section falls on a Saturday, Sunday, or Federal holiday, the deadline for filing is the next succeeding business day. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7705) Sec. 222.4 How does the Secretary determine when an application is timely filed? To be timely filed under Sec. 222.3, an application must-- (a) Be received by the Secretary on or before the applicable filing date; or (b) Bear a U.S. Postal Service postmark dated on or before that filing date. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7705) Note to Paragraph (b) of this section: The U.S. Postal Service does not uniformly provide a dated postmark. Before relying on this method, an applicant should check with its local post office. Sec. 222.5 When may a local educational agency amend its application? (a) An LEA may amend its application following any of the events described in Sec. 222.3(b)(1) by submitting a written request to the Secretary and a copy to its SEA no later than the earlier of the following events: (1) The 60th day following the applicable event. (2) By the end of the Federal fiscal year-- (i) For which assistance is sought under section 8002; or (ii) Preceding the fiscal year for which the LEA seeks assistance under section 8003. (b) The LEA also may amend its application no later than the end of the Federal fiscal year for which assistance is sought under section 8002 or of the fiscal year preceding the fiscal year for which the LEA seeks assistance under section 8003-- (1) For an adjustment to its payment based on data obtained from a second membership count; or (2) For an adjustment to its payment based on actual satisfactory data regarding eligible Federal properties or federally connected children if those data were not available at the time the LEA filed its application. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7705) Sec. 222.6 Which applications does the Secretary accept? (a) The Secretary accepts or approves for payment any otherwise approvable application under section 8002 or 8003 that is timely filed with the Secretary in accordance with Secs. 222.3, 222.4, and 222.5, as applicable. (b)(1) Except as provided in paragraph (b)(2) of this section, the Secretary does not accept or approve for payment any application under section 8002 or 8003 that is not timely filed with the Secretary. (2) The Secretary accepts and approves for payment any otherwise approvable application filed within 60 [[Page 50782]] days of the applicable filing date established in Sec. 222.3, but reduces the payment based on the application by 10 percent of the amount that would have been paid if the application had been filed by the applicable filing date established in that section. (Authority: 20 U.S.C. 7705) Sec. 222.7 What information may a local educational agency submit after the application deadline? (a) General. Except as indicated in paragraph (b) of this section, the Secretary does not consider information submitted by an applicant after the deadlines prescribed in this subpart for submission of applications and amendments to applications. (b) Information solicited by the Secretary. The Secretary may solicit from an applicant at any time additional information to process an application. (Authority: 20 U.S.C. 1221e-3, 7702, 7703, 7705, 7706) Sec. 222.8 What action must an applicant take upon a change in its boundary, classification, control, governing authority, or identity? (a) Any applicant that is a party to an annexation, consolidation, deconsolidation, merger, or other similar action affecting its boundaries, classification, control, governing authority, or identity must provide the following information to the Secretary as soon as practicable: (1) A description of the character and extent of the change. (2) The effective date of the change. (3) Full identification of all predecessor and successor LEAs. (4) Full information regarding the disposition of the assets and liabilities of all predecessor LEAs. (5) Identification of the governing body of all successor LEAs. (6) The name and address of each authorized representative officially designated by the governing body of each successor LEA for purposes of the Act. (b) If a payment is made under section 8002 or 8003 to an LEA that has ceased to be a legally constituted entity during the regular school term due to an action described in paragraph (a) of this section, the LEA may retain that payment if-- (1) An adjustment is made in the payment of a successor LEA to account for the payment to the predecessor LEA; or (2)(i) The payment amount does not exceed the amount the predecessor LEA would have been eligible to receive if the change in boundaries or organization had not taken place; and (ii) A successor LEA is not an eligible applicant. (c) A predecessor LEA receiving any portion of a payment under section 8002 or 8003 that exceeds the amount allowed by paragraph (b)(2)(i) of this section must return the excessive portion to the Secretary, unless the Secretary determines otherwise under section 8012 of the Act. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7702 and 7703) Sec. 222.9 What records must a local educational agency maintain? Except as otherwise provided in Sec. 222.10-- (a) An LEA must maintain adequate written records to support the amount of payment it received under the Act for any fiscal year; (b) On request, the LEA must make its records available to the Secretary for the purpose of examination or audit; and (c) Each applicant must submit such reports and information as the Secretary may require to determine the amount that the applicant may be paid under the Act. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 1221e-3, 1232f, 7702, 7703, 7704, 7706) Sec. 222.10 How long must a local educational agency retain records? An LEA must retain the records described in Sec. 222.9 until the later of-- (a) Three years after the last payment for a fiscal year; or (b) If the records have been questioned on Federal audit or review, until the question is finally resolved and any necessary adjustments to payments have been made. (Authority: 20 U.S.C. 1221e-3, 1232f, 7702, 7703, 7704, 7706) Sec. 222.11 How does the Secretary recover overpayments? Except as otherwise provided in section 8012, the Secretary adjusts for and recovers overpayments as follows: (a) If the Secretary determines that an LEA has received a payment in excess of what it should have received under the Act and this part, the Secretary deducts the amount of the overpayment from subsequent payments for which the LEA is eligible under the Act. (b)(1) If the LEA is not eligible for subsequent payments under the Act, the LEA must promptly refund the amount of the overpayment to the Secretary. (2) If the LEA does not promptly repay the amount of the overpayment or promptly enter into a repayment agreement with the Secretary, the Secretary may use the procedures in 34 CFR part 30 to offset that amount against payments from other Department programs or, under the circumstances permitted in part 30, to request that another agency offset the debt. (Authority: 20 U.S.C. 1221e-3, 1226a-1, 7702, 7703, 7706, 7712) Sec. 222.12 [Reserved] Sec. 222.13 What other statutes and regulations apply to this part? (a) The following Federal statutes and regulations on nondiscrimination apply to assistance under this part: (1) The provisions of title VI of the Civil Rights Act of 1964 (Pub. L. 88-352) (prohibition of discrimination on the basis of race, color or national origin), and the implementing regulations (34 CFR part 100). (Authority: 42 U.S.C. 2000d-2000d-4) (2) The provisions of title IX of the Education Amendments of 1972 (Pub. L. 92-318) (prohibition of discrimination on the basis of sex), and the implementing regulations (34 CFR part 106). (Authority: 20 U.S.C. 1681-1683) (3) The provisions of section 504 of the Rehabilitation Act of 1973 (Pub. L. 93-112) (prohibition of discrimination on the basis of disability), and the implementing regulations (34 CFR part 104). (Authority: 29 U.S.C. 794) (4) The provisions of title II of the Americans with Disabilities Act of 1990 (Pub. L. 101-336) (prohibition of discrimination on basis of disability), and any implementing regulations. (Authority: 42 U.S.C. 12101-12213) (5) The provisions of the Age Discrimination Act of 1975 (Pub. L. 94-135) (prohibition of age discrimination), and any implementing regulations. (Authority: 42 U.S.C. 6101) (b) The following Education Department General Administrative Regulations (EDGAR): (1) Subparts A, E, F, and Secs. 75.900 and 75.910 of 34 CFR part 75 (Direct Grant Programs) for payments under sections 8003(d) (payments for federally connected children with disabilities), 8007 (construction), and 8008 (school facilities), except for the following: (i) Section 75.603 does not apply to payments under section 8007 (construction) or section 8008 (school facilities). (ii) Section 75.605 does not apply to payments under section 8007 (construction). (iii) Sections 75.600-602, 75.604, and 75.606-617 apply to payments under section 8007 (construction) only to the extent that funds received under that section are used for major renovations or to construct new school facilities. (2) 34 CFR part 77 (Definitions that Apply to Department Regulations). (3) 34 CFR part 80 (Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments), for payments under sections 8003(d) (payments for federally connected children with [[Page 50783]] disabilities), 8007 (construction), and 8008 (school facilities). (4) 34 CFR part 82 (New Restrictions on Lobbying). (5) 34 CFR part 85 (Governmentwide Debarment and Suspension (Nonprocurement) and Governmentwide Requirements for Drug-free Workplace (Grants)). (Authority: 20 U.S.C. 1221e-3) Secs. 222.14-222.19 [Reserved] Subpart B--Payments for Federal Property under Section 8002 of the Act Sec. 222.20 What definitions apply to this subpart? In addition to the terms referenced or defined in Sec. 222.2, the following definitions apply to this subpart: Acquisition or acquired by the United States. (1) The term means-- (i) The receipt or taking by the United States of ownership in fee simple of real property by condemnation, exchange, gift, purchase, transfer, or other arrangement; (ii) The receipt by the United States of real property as trustee for the benefit of individual Indians or Indian tribes; or (iii) The imposition by the United States of restrictions on sale, transfer, or exchange of real property held by individual Indians or Indian tribes. (2) The definition of ``acquisition'' in 34 CFR 77.1(c) (Definitions that Apply to Department Regulations) of this title does not apply to this subpart. (Authority: 20 U.S.C. 7702) Assessed value. For the purpose of determining eligibility under section 8002(a)(1) and Sec. 222.21, the following definition applies: (1) The term means the value that is assigned to real property, for the purpose of generating local real property tax revenues for current expenditures (as defined in section 8013 of the Act), by a State or local official who is legally authorized to determine that assessed value. (2) The term does not include-- (i) A value assigned to tax-exempt real property; (ii) A value assigned to real property for the purpose of generating other types of revenues, such as payments in lieu of taxes (PILOTs); (iii) Fair market value, or a percentage of fair market value, of real property unless that value was actually used to generate local real property tax revenues for current expenditures (as defined in section 8013); or (iv) A value assigned to real property in a condemnation or other court proceeding, or a percentage of that value, unless that value was actually used to generate local real property tax revenues for current expenditures (as defined in section 8013). (Authority: 20 U.S.C. 7702(a)(1)) Eligible Federal property. (1) The term means ``Federal property'' as defined in Sec. 222.2(c) for section 8002, which meets the following additional requirements: (i) The United States has acquired the Federal property since 1938; and (ii) The Federal property was not acquired by exchange for other Federal property that the United States owned within the school district before 1939. (2) In addition, for local educational agencies (LEAs) that are eligible under Sec. 222.21(a)(2), the term also means land acquired by the United States Forest Service between 1915 and 1990. (Authority: 20 U.S.C. 7702) Sec. 222.21 What requirements must a local educational agency meet concerning Federal acquisition of real property within the local educational agency? (a) For an LEA with an otherwise approvable application to be eligible to receive financial assistance under section 8002, the LEA must meet the requirements in subpart A of these regulations and Sec. 222.22, and, unless otherwise provided by statute as meeting the requirements in section 8002(a)(1)(C), document-- (1) That the United States owns or has acquired ``eligible Federal property'' within the LEA, that has an aggregate assessed value of 10 percent or more of the assessed value of-- (i) All real property in that LEA, based upon the assessed values of the eligible Federal property and of all real property (including that Federal property) on the date or dates of acquisition of the eligible Federal property; or (ii) All real property in the LEA as assessed in the first year preceding or succeeding acquisition, whichever is greater, only if-- (A) The assessment of all real property in the LEA is not made at the same time or times that the Federal property was so acquired and assessed; and (B) State law requires an assessment be made of property so acquired; or (2)(i) That, as demonstrated by written evidence from the United States Forest Service satisfactory to the Secretary, the LEA contains between 20,000 and 60,000 acres of land that has been acquired by the United States Forest Service between 1915 and 1990; and (ii) That the LEA serves a county chartered by State law in 1875 or 1890. (b) ``Federal property'' described in section 8002(d) (certain transferred property) is considered to be owned by the United States for the purpose of paragraph (a) of this section. (c) If, during any fiscal year, the United States sells, transfers, is otherwise divested of ownership of, or relinquishes an interest in or restriction on, eligible Federal property, the Secretary redetermines the LEA's eligibility for the following fiscal year, based upon the remaining eligible Federal property, in accordance with paragraph (a) of this section. This paragraph does not apply to a transfer of real property by the United States described in section 8002(d). (d) Except as provided under paragraph (a)(2) of this section, the Secretary's determinations and redeterminations of eligibility under this section are based on the following documents: (1) For a new section 8002 applicant or newly acquired eligible Federal property, only upon-- (i) Original records as of the time(s) of Federal acquisition of real property, prepared by a legally authorized official, documenting the assessed value of that real property; or (ii) Facsimiles of those records such as microfilm or other reproduced copies. (2) For a redetermination of an LEA's eligibility under section 8002(a)(1), only upon-- (i) Records described in paragraph (d)(1) of this section; or (ii) Department records. (e) The Secretary does not base the determination or redetermination of an LEA's eligibility under this section upon secondary documentation such as estimates, certifications, or appraisals. (Authority: 20 U.S.C. 7702(a)(1)) Sec. 222.22 How does the Secretary treat compensation from Federal activities for purposes of determining eligibility and payments? (a) An LEA with an otherwise approvable application is eligible to receive assistance under section 8002 for a fiscal year only if the LEA meets the requirements in subpart A of these regulations and Sec. 222.21, and is not substantially compensated, for the loss in revenue resulting from Federal ownership of real property by increases in revenue accruing to the LEA during the previous fiscal year from Federal activities with respect to the eligible Federal property in the LEA. (b) The Secretary considers that an LEA is substantially compensated by increases in revenue from Federal activities with respect to the eligible Federal property if-- (1) The LEA received new or increased revenue during the preceding fiscal year that is generated directly from the eligible Federal property or activities in or on that property; and (2) The revenue described in paragraph (b)(1) of this section equals or exceeds the maximum payment amount under section 8002(b) for the fiscal year for which the LEA seeks assistance. (c) If an LEA described in paragraph (a) of this section received revenue described in paragraph (b)(1) of this [[Page 50784]] section during the preceding fiscal year that is less than the maximum payment amount under section 8002(b) for the fiscal year for which the LEA seeks assistance, the Secretary reduces the LEA's section 8002 payment by an amount equal to that amount of revenue. (d) For purposes of this section, the amount of revenue that an LEA receives during the previous fiscal year from activities conducted on Federal property shall not include payments received by the agency from the Secretary of Defense to support-- (1) The operation of a domestic dependent elementary or secondary school; or (2) The provision of a free public education to dependents of members of the Armed Forces residing on or near a military installation. (Authority: 20 U.S.C. 7702(a)(2) and (b)(1)(A)) Secs. 222.23-222.29 [Reserved] Subpart C--Payments for Federally Connected Children under Section 8003(b) and (e) of the Act Sec. 222.30 What is ``free public education''? In addition to the terms defined in Sec. 222.2, the following definition applies to this part: Free public education. (1) The term means education that is provided-- (i) At public expense; (ii)(A) As the complete elementary or secondary educational program as determined under State law through grade 12; and (B) Preschool education, whether or not included as elementary education by State law; (iii) In a school of the local educational agency (LEA) or under a tuition arrangement with another LEA or other educational entity; and (iv) Under public supervision and direction, except with respect to children with disabilities. (2) For the purpose of paragraph (1)(i) of this definition, education is provided at public expense if-- (i) There is no tuition charge to the child or the child's parents; and (ii) Federal funds, other than funds under the Act, do not provide a substantial portion of the educational program. (3) For the purpose of paragraph (1)(ii) of this definition, the complete elementary or secondary educational program is the program recognized by the State as meeting all requirements for elementary or secondary education for the children claimed and, except for preschool education, does not include a program that provides only-- (i) Supplementary services or instruction; or (ii) A portion of the required educational program. (4) For the purpose of paragraph (1)(iii) of this definition, a tuition arrangement must-- (i) Satisfy all applicable legal requirements in the State; and (ii) Genuinely reflect the applicant LEA's responsibility to provide a free public education to the children claimed under section 8003. (5) For the purpose of paragraph (1)(iv) of this definition, education provided under public supervision and direction means education that is provided-- (i) In a school of the applicant LEA or another LEA; or (ii) By another educational entity, over which the applicant LEA, or other public agency, exercises authority with respect to the significant aspects of the educational program for the children claimed. The Secretary considers significant aspects of the educational program to include administrative decisions relating to teachers, instruction, and curriculum. (Authority: 20 U.S.C. 7703, 7709, 7713(6)) Sec. 222.31 To which local educational agencies does the Secretary make basic support payments under section 8003(b) of the Act? The Secretary makes payments to an LEA with an otherwise approvable application for children claimed under section 8003(b) of the Act if-- (a) The LEA meets the requirements in subpart A of these regulations and this subpart; and (b)(1) The LEA is responsible under applicable State or Federal law for providing a free public education to those children; (2) The LEA is providing a free public education to those children; and (3) The State provides funds for the education of those children on the same basis as all other public school children in the State, unless permitted otherwise under section 8009 of the Act. (Authority: 20 U.S.C. 7703 and 7709) Sec. 222.32 Upon what information is a local educational agency's basic support payment based? (a) The Secretary determines an LEA's payment under section 8003(b) on the basis of information in the LEA's application, including information regarding the membership of federally connected children. (b) The LEA must supply information in its application regarding its federally connected membership on the basis of any count described in Secs. 222.33 through 222.35. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703 and 7705) Sec. 222.33 When must an applicant make its first or only membership count? (a)(1) An applicant must select a day in the current school year as the survey date for making the first membership count, which must be no earlier than the fourth day of the regular school year and on or before January 31. (2) The applicant must use the same survey date for all schools in the LEA. (b) As of the survey date, the applicant must-- (1) Count the membership of its federally connected children; and (2) Count the total membership of its children--both federally connected and non-federally connected. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703, 7705, 7706) Sec. 222.34 If an applicant makes a second membership count, when must that count be made? (a)(1) The applicant may, but is not required to, make a second count of membership. (2) If the applicant chooses to make a second count of membership, the applicant must select a day after January 31, but no later than May 14, as the survey date for making the second membership count, and make that count in accordance with Sec. 222.33(b). (3) The applicant must use the same survey date for the second membership count for all schools in the LEA. (b) The applicant may use the information obtained from a second membership count to amend its application for assistance as described in Sec. 222.5(b)(1). (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703 and 7705) Sec. 222.35 How does a local educational agency count the membership of its federally connected children? An applicant counts the membership of its federally connected children by using one or both of the following methods: (a) Parent-pupil survey. An applicant may conduct a parent-pupil survey to count the membership of its federally connected children, which must be counted as of the survey date. (1) The applicant shall conduct a parent-pupil survey by providing a form to a parent of each pupil enrolled in the LEA to substantiate the pupil's place of residence and the parent's place of employment. A parent-pupil survey form must include the following: (i) Pupil enrollment information (this information may also be obtained from school records), including-- (A) Name of pupil; (B) Date of birth of the pupil; and (C) Name of public school and grade of the pupil. (ii) Pupil residence and parent employment information, including-- (A) Address of the pupil's residence (or other location information for that residence, such as legal description), [[Page 50785]] including the name of the Federal facility if the pupil's residence is on Federal property; and (B) Name (as it appears on the employer's payroll record) of the parent (mother, father, legal guardian or other person standing in loco parentis) who is employed on Federal property and with whom the pupil resides (unless the parent is a member of the uniformed services on active duty); (C) Name and address of the Federal property on which the parent is employed (or other location information, such as legal description), unless the parent is a member of the uniformed services on active duty; (D) If the parent is a member of the uniformed services on active duty, the name, rank, and branch of service of that parent; (E) If the parent is a civilian employed on a Federal vessel, the name of the vessel, hull number, and name of the controlling agency; (F) The signature of the parent supplying the information and the date of such signature; and (G) The name of the parent's employer and the employer's address (or other location information, such as legal description), unless a parent is a member of the uniformed services on active duty. (2) An LEA may accept a parent-pupil survey form, or a parent-pupil survey form that is signed by a person other than a parent, only under unusual circumstances. In those instances, the parent-pupil survey form must show why the parent did not sign the survey form, and when, how, and from whom the residence and employment information was obtained. (b) Source Check. (1) An applicant may count the membership of its federally connected children by using a source check to substantiate a pupil's place of residence or parent's place of employment on the survey date. (2) A source check is a form provided-- (i) To a parent's employer, on which the employer certifies as to the place of employment of a parent of a pupil claimed; (ii) To a housing official, on which the official certifies as to the residence of each pupil claimed; or (iii) To a tribal official, on which the official certifies as to the residence of each pupil claimed residing on Indian lands over which that tribal official has jurisdiction. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703 and 7706) Sec. 222.36 What minimum number of federally connected children must a local educational agency have to receive a payment on behalf of those children under section 8003(b) and (e)? (a) Except as provided in paragraph (d) of this section, an LEA is eligible to receive a payment under section 8003(b) (basic support and learning opportunity threshold) and (e) (hold harmless) for a fiscal year only if the total number of its eligible federally connected children for whom it provided a free public education for the preceding fiscal year was-- (1) At least 400 who were in average daily attendance (ADA); or (2) At least 3 percent of the total number of children in ADA. (b) Except as provided in paragraph (d) of this section, an applicant LEA is eligible to receive a payment under section 8003 for a fiscal year on behalf of federally connected children described in section 8003(a)(1)(F) or (G) only if the total number of those children for whom it provided a free public education for the preceding fiscal year was at least-- (1) 2,000 in ADA; and (2) 15 percent of the total number of the children in ADA. (c) Children described in paragraph (b) of this section are counted for the purposes of paragraph (a) of this section only if the applicant LEA is eligible to receive a payment on behalf of those children under section 8003. (d) This section does not apply to hold harmless payments under section 8003(e) for fiscal year 1995. (Authority: 20 U.S.C. 7703(a)(3) and (b)(1)(B)) Sec. 222.37 How does the Secretary calculate the average daily attendance of federally connected children? (a) This section describes how the Secretary computes the ADA of federally connected children for each category in section 8003 to determine an applicant's payment. (b) If an LEA is in a State that collects actual ADA data for purposes of distributing State aid for education, the Secretary calculates the ADA of that LEA's federally connected children for the current fiscal year payment as follows: (1) Except as provided in paragraph (b)(3) of this section-- (i) By dividing the ADA of all the LEA's children for the second preceding fiscal year by the LEA's total membership on its survey date for the second preceding fiscal year (or, in the case of an LEA that conducted two membership counts in the second preceding fiscal year, by the average of the LEA's total membership on the two survey dates); and (ii) By multiplying the figure determined in paragraph (b)(1)(i) of this section by the LEA's total membership of federally connected children in each subcategory described in section 8003 and claimed in the LEA's application for the current fiscal year payment (or, in the case of an LEA that conducts two membership counts, by the average of the LEA's total membership of federally connected children in each subcategory on the two survey dates). (2)(i) For purposes of this section, actual ADA means raw ADA data that have not been weighted or adjusted to reflect higher costs for specific types of students for purposes of distributing State aid for education. (ii) If an LEA provides a program of free public summer school, attendance data for the summer session are included in the LEA's ADA figure in accordance with State law or practice. (iii) An LEA's ADA count includes attendance data for children for whom it makes tuition arrangements with other educational entities. (3) Attendance data are not counted for any child-- (i) Who is not physically present at school for the daily minimum time period required by the State, unless the child is-- (A) Participating via telecommunication or correspondence course programs that meet State standards; or (B) Being served by a State-approved homebound instruction program for the daily minimum time period appropriate for the child; or (ii) Attending the applicant's schools under a tuition arrangement with another LEA. (c) If an LEA is in a State that does not collect ADA data for purposes of distributing State aid for education, the LEA or SEA shall submit data necessary for the Secretary to calculate the ADA of the LEA's federally connected children as follows: (1) If an LEA is in a State that formerly collected ADA data for purposes of distributing State aid for education, the SEA may submit the total ADA and total membership data for the State for each of the last three fiscal years that ADA data were collected. The Secretary uses these data to calculate the ADA of the LEA's federally connected children by-- (i) Dividing the total ADA data by the total membership data for each of the three fiscal years and averaging the results; and (ii) Multiplying the average determined in paragraph (c)(1)(i) of this section by the LEA's total membership of federally connected children as described in paragraph (b)(1)(ii) of this section. (2) An LEA may submit attendance data based on sampling conducted during the previous fiscal year. The sampling must include attendance data for all children for at least 30 school days. The data must be collected during [[Page 50786]] at least three periods evenly distributed throughout the school year. Each collection period must consist of at least five consecutive school days. The Secretary uses these data to calculate the ADA of the LEA's federally connected children by-- (i) Determining the ADA of all children in the sample; (ii) Dividing the figure obtained in paragraph (c)(2)(i) of this section by the LEA's total membership for the previous fiscal year; and (iii) Multiplying the figure determined in paragraph (c)(2)(ii) of this section by the LEA's total membership of federally connected children for the current fiscal year, as described in paragraph (b)(1)(ii) of this section. (3) If an LEA is in a State that distributes State aid for education based on data similar to attendance data, the SEA may request that the Secretary use those data to calculate the ADA of the LEA's federally connected children. If the Secretary determines that those data are, in effect, equivalent to attendance data, the Secretary allows use of the requested data and determines the method by which the ADA of the LEA's federally connected children will be calculated. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703, 7706, 7713) Sec. 222.38 What is the maximum basic support payment that a local educational agency may receive under section 8003(b)? The maximum basic support payment that an LEA may receive under section 8003(b) for any fiscal year is the sum of its total weighted student units under section 8003(a)(2) for the federally connected children eligible to be counted as the basis for payment, multiplied by the greater of one of the following: (a) One-half of the State average per pupil expenditure for the third fiscal year preceding the fiscal year for which the LEA seeks assistance. (b) One-half of the national average per pupil expenditure for the third fiscal year preceding the fiscal year for which the LEA seeks assistance. (c) The comparable local contribution rate (LCR) determined in accordance with Secs. 222.39-222.41. (d) The State average per pupil expenditure multiplied by the local contribution percentage as defined in section 8013(8) of the Act. (Authority: 20 U.S.C. 7703 (a), (b) and (c)) Sec. 222.39 How does a State educational agency identify generally comparable local educational agencies for local contribution rate purposes? (a) To identify generally comparable LEAs within its State for LCR purposes, the State educational agency (SEA) for that State shall use data from the third fiscal year preceding the fiscal year for which the LCR is being computed to group all of its LEAs, including all applicant LEAs, as follows: (1) Grouping by grade dpan/legal classification alone. Divide all LEAs into groups that serve the same grade span and then subdivide the grade span groups by legal classification, if the Secretary considers this classification relevant and sufficiently different from grade span within the State. As an alternative grade-span division, after consultation with the applicant LEAs in the State, divide all LEAs into elementary, secondary, or unified grade-span groups, as appropriate, within the State. (2) Grouping by Grade Span/Legal Classification and Size. (i) Divide all LEAs into groups by grade span (or the alternative grade- span groups described in paragraph (a)(1)) of this section and legal classification, if relevant and sufficiently different from grade span and size. (ii) List all LEAs within each group in descending order by size as measured by ADA, placing the LEA with the largest ADA at the top of the list. A State that does not tabulate actual annual ADA shall use the same formula for establishing ADA for the purpose of ranking LEAs by size as the Department has approved for the purpose of calculating payments under section 8003 for applicant LEAs in the State. (iii) After consultation with the applicant LEAs in the State, divide each group into either two subgroups or three subgroups. (iv) To determine the subgroups, divide each list at the point(s) that will result in as nearly equal numbers of LEAs in each subgroup as possible, so that no group is more than one LEA larger than any other group. (3) Grouping by grade span/legal classification and location. Divide all LEAs into groups by grade span (or the alternative grade- span groups described in paragraph (a)(1) of this section) and, if relevant and sufficiently different from grade span and location, legal classification; then subdivide these groups by location, as determined by placement inside or outside a metropolitan statistical area (MSA) as defined by the U.S. Bureau of the Census. The Department will supply SEAs with lists of MSA classifications for their LEAs, and only the classifications on those lists will be recognized by the Department for the purposes of these regulations. (4) Grouping by grade span/legal classification, size, and location. (i) Divide all LEAs into groups by grade span (or the alternative grade-span groups described in paragraph (a)(1) of this section) and, if relevant and sufficiently different from grade span, size, and location, legal classification; then subdivide these groups by size (into two or three subgroups for each grade span, as described in paragraph (a)(2) of this section); and further subdivide these groups by location (inside or outside an MSA). (ii) In using both the size and location factors, the SEA shall subdivide according to the size factor before the location factor. (b) After applying the following restrictions, the SEA shall compute an LCR according to the provisions of Sec. 222.41 for each group of generally comparable LEAs identified under paragraph (a) of this section, as follows: (1) The SEA shall not, when computing an LCR, include the following ``significantly impacted'' LEAs in any group of generally comparable LEAs: (i) Any LEA having--in the third fiscal year preceding the fiscal year for which the LCR is being computed--20 percent or more of its ADA composed of children identified under section 8003(a)(1)(A)-(C). (ii) Any LEA having--in the third fiscal year preceding the fiscal year for which the LCR is being computed--50 percent or more of its ADA composed of children identified under section 8003(a)(1)(A)-(G) who were eligible under Sec. 222.36 to be counted as the basis for payment under section 8003. (2) The SEA may not compute an LCR for any group that contains fewer than 10 LEAs. (c)(1) For an applicant LEA that satisfies the requirements contained in paragraph (c)(3) of this section, the SEA, in consultation with the LEA, may select a subgroup of 10 or more generally comparable LEAs from the group identified under paragraph (a)(2) of this section that includes the applicant LEA. (2) An LEA that otherwise meets either of the requirements of paragraph (c)(3) of this section but serves a different span of grades from all other LEAs in its State (and therefore cannot match any group of generally comparable LEAs under paragraph (a)(2) of this section) must be matched, for purposes of this paragraph (c) only, to a group using legal classification and size as measured by ADA. The group identified using legal classification and size will be the applicant's group under paragraph (a)(2) of this section for purposes of this paragraph (c) only. (3) In order to qualify under paragraph (c) (1) or (2) of this section, an applicant LEA must either-- (i)(A) Be located entirely on Federal land; and (B) Be raising either no local revenues or an amount of local revenues the Secretary determines to be minimal; or (ii)(A) Be located in a State where State aid makes up no more than 40 [[Page 50787]] percent of the State average per pupil expenditure in the third fiscal year preceding the fiscal year for which the LCR is being computed; (B) In its application, have federally connected children identified under section 8003(a)(1)(A)-(C) equal to at least 20 percent of its total ADA; and (C) In its application, have federally connected children identified under section 8003(a)(1)(A)-(G) who were eligible under Sec. 222.36 to be counted as the basis for payment under section 8003 equal to at least 50 percent of its total ADA. (4) In the case of an applicant LEA that meets either of the requirements contained in paragraph (c)(3) of this section, the SEA, in consultation with the LEA, may select 10 or more generally comparable LEAs that share one or more common factors of general comparability with the eligible applicant LEA, as follows: (i)(A) The SEA must consider one or more generally accepted, objectively defined factors that affect the applicant's cost of educating its children. Examples of such cost-related factors include location inside or outside an MSA, sparsity of population, an unusually large geographical area, economically depressed area, low-income families, children with disabilities, neglected or delinquent children, low-achieving children, children with limited English proficiency, and minority children. (B) The SEA may not consider cost-related factors that can be varied at the discretion of the applicant LEA or its generally comparable LEAs or factors dependent on the wealth of the applicant LEA or its generally comparable LEAs. Examples of factors that may not be considered include special alternative curricular programs, pupil- teacher ratio, and per pupil expenditures. (ii) The SEA must apply the factor or factors of general comparability recommended under paragraph (c)(4)(i)(A) of this section in one of the following ways in order to identify 10 or more generally comparable LEAs for the eligible applicant LEA, none of which may be significantly impacted LEAs: (A) The SEA identifies all of the LEAs in the group to which the eligible applicant LEA belongs under paragraph (a)(2) of this section that share the recommended factor or factors. If the subgroup containing the eligible applicant LEA includes at least 10 other LEAs (excluding significantly impacted LEAs), it will be the eligible applicant LEA's new group of generally comparable LEAs. The LCR for the eligible applicant LEA shall be computed using the data for all of the LEAs in the subgroup except the eligible applicant LEA. Example. An eligible applicant LEA contains a designated economically depressed area, and the SEA recommends ``economically depressed area'' as an additional factor of general comparability. From the group of LEAs under paragraph (a)(2) of this section that includes the eligible applicant LEA, the SEA identifies two subgroups, those LEAs that contain a designated economically depressed area and those that do not. The entire subgroup identified by the SEA that includes the eligible applicant LEA is that LEA's new group of generally comparable LEAs if it contains at least 10 LEAs. (B) After the SEA identifies all of the LEAs in the group that the eligible applicant LEA belongs to under paragraph (a)(2) of this section that share the recommended factor or factors, the SEA then systematically orders all of the LEAs in the group that includes the eligible applicant LEA. The SEA may further divide the ordered LEAs into subgroups by using logical division points (e.g., the median, quartiles, or standard deviations) or a continuous interval of the ordered LEAs (e.g., a percentage or a numerical range). If the subgroup containing the eligible applicant LEA includes at least 10 other LEAs (excluding significantly impacted LEAs), it will be the eligible applicant LEA's new group of generally comparable LEAs. The LCR for the eligible applicant LEA shall be computed using the data for all of the LEAs in the subgroup except the eligible applicant LEA. Example 1. An eligible applicant LEA serves an unusually high percentage of children with disabilities, and the SEA recommends ``proportion of children with disabilities'' as an additional comparability factor. From the group of LEAs under paragraph (a)(2) of this section that includes the eligible applicant LEA, the SEA lists the LEAs in descending order according to the percentage of children with disabilities enrolled in each of the LEAs. The SEA divides the list of LEAs into four groups containing equal numbers of LEAs. The group containing the eligible applicant LEA is that LEA's new group of generally comparable LEAs if it contains at least 10 LEAs. Example 2. An eligible applicant LEA serves an unusually high percentage of minority children, and the SEA recommends ``proportion of minority children'' as an additional comparability factor. From the group of LEAs under paragraph (a)(2) of this section that includes the eligible applicant LEA, the SEA lists the LEAs in descending order according to the percentage of minority children enrolled in each of the LEAs. The SEA chooses from the list of LEAs the 15 LEAs whose percentages of minority children are closest to the eligible applicant LEA's. These 15 LEAs will be the eligible applicant LEA's new group of generally comparable LEAs. (C) The SEA may recommend and apply more than one factor of general comparability in selecting a new group of 10 or more generally comparable LEAs for the eligible applicant LEA. If the subgroup containing the eligible applicant LEA includes at least 10 other LEAs (excluding significantly impacted LEAs), it will be the eligible applicant LEA's new group of generally comparable LEAs. The LCR for the eligible applicant LEA shall be computed using the data from all of the LEAs in the subgroup except the eligible applicant LEA. Example. An eligible applicant LEA is very sparsely populated and serves an unusually high percentage of children with limited English proficiency. The SEA recommends ``sparsity of population'' and ``proportion of children with limited English proficiency'' as additional comparability factors. From the group of LEAs under paragraph (a)(2) of this section that includes the eligible applicant LEA, the SEA identifies all LEAs that are sparsely populated. The SEA further subdivides the sparsely populated LEAs into two groups, those that serve an unusually high percentage of children with limited English proficiency and those that do not. The subgroup of at least 10 sparsely populated LEAs that serve a high percentage of children with limited English proficiency is the eligible applicant LEA's new group of generally comparable LEAs. (4)(i) Using the new group of generally comparable LEAs selected under paragraph (c)(4) of this section, the SEA shall compute the LCR for the eligible applicant LEA according to the provisions of Sec. 222.41. (ii) The SEA shall submit the resulting LCR to the Secretary and provide the Secretary a description of the additional factor or factors of general comparability and the data used to identify the new group of generally comparable LEAs. (iii) The Secretary reviews the data submitted by the SEA, and accepts the LCR for the purpose of use under section 8003(b)(1)(C)(iii) in determining the LEA's maximum payment under section 8003 if the Secretary determines that it meets the purposes and requirements of the Act and this part. (d) This section does not apply to applicant LEAs located in-- (1) Puerto Rico; (2) Wake Island; (3) Guam; (4) American Samoa; (5) Any outlying area; and (6) Any State in which there is only one LEA. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(b)(1)(C)(iii)) Sec. 222.40 How does a local educational agency select a local contribution rate based on generally comparable local educational agencies? (a) In selecting an LCR based upon generally comparable LEAs, an LEA shall use the following steps: (1) Step 1. The LEA shall select the factor or factors in Sec. 222.39 the LEA wishes to use as the basis for general comparability. [[Page 50788]] (2) Step 2. Using State-supplied data, the LEA shall identify within the State the entire group of LEAs (containing at least 10 LEAs exclusive of significantly impacted LEAs described in Sec. 222.39(b)(1)) that matches the factor or factors selected in Step 1 and that contains the applicant LEA or would contain the applicant LEA if it were not significantly impacted. (3) Step 3. The LEA shall recommend to the Secretary the LCR, which the SEA has computed according to the provisions of Sec. 222.39, based on the group identified in Step 2. (b) A significantly impacted LEA described in Sec. 222.39(b)(1) may-- (1) Apply for assistance under this program; and (2) Under the generally comparable LEA method, recommend for itself the LCR of any group in which it would be included based on grade span/ legal classification, size, location, or a combination of these factors, if it were not excluded as significantly impacted in Sec. 222.39(b)(1). Example. An LEA applies for assistance under section 8003 and wishes to recommend to the Secretary an LCR based on generally comparable LEAs within its State. 1. Characteristics of Applicant LEA The grade span of the applicant LEA is kindergarten through grade 8 (K-8). In the applicant's State, legal classification of LEAs is based on grade span, and thus does not act to further subdivide groups of LEAs. The ADA of the applicant LEA is above the median ADA of LEAs serving only K-8 in the State. The applicant LEA is located outside an MSA. 2. Characteristics of Other LEAs Serving Same Grade Span The SEA of the applicant's State groups all LEAs in its State according to the factors in Sec. 222.39. (a) The SEA identifies the following groups: (i) One hundred and one LEAs serve only K-8. The SEA has identified a group of 50 LEAs having an ADA above the median ADA for the group of 101, one LEA having an ADA at the median, and a group of 50 LEAs having an ADA below the median ADA; and according to Sec. 222.39(a)(2)(i), the SEA considers 51 LEAs to have an ADA below the median ADA. (ii) Of the 101 LEAs in the group, the SEA has identified a group of 64 LEAs as being inside an MSA and a group of 37 LEAs as being outside an MSA. (iii) Among the group of 50 LEAs having an ADA above the median, the SEA has identified a group of 35 LEAs as being inside an MSA and a group of 15 LEAs as being outside an MSA. (iv) Among the group of 51 LEAs having an ADA at or below the median, the SEA has identified a group of 29 LEAs as being inside an MSA and 22 LEAs as being outside an MSA. (v) One LEA has 20 percent of its ADA composed of children identified under section 8003(a)(1)(A)-(C) and, therefore, must be excluded from any group it falls within before the SEA computes an LCR for the group. The LEA has an ADA below the median ADA and is located outside an MSA. (b) On the basis of Sec. 222.41, the SEA computes the LCR for each group of generally comparable LEAs that the SEA has identified. 3. Selection of Generally Comparable LEAs The applicant LEA selects the group of generally comparable LEAs matching the factor or factors it wishes to use as the basis for general comparability. Under the requirements of Sec. 222.39, the applicant LEA must begin with the group that includes all LEAs with its grade span, and, if relevant and sufficiently different, legal classification. In this case, grade span and legal classification happen to be the same. Thus, the group would include 100 LEAs, after excluding the one significantly impacted LEA. The applicant LEA then has several options: (a) Option 1. The applicant LEA may select as its group of generally comparable LEAs on which to base its recommended LCR the entire group of 100 LEAs serving K-8, after excluding the one significantly impacted LEA. The applicant LEA then recommends to the Secretary as its LCR the rate computed for this group by the SEA. (b) Option 2. Instead of selecting the group of 100, the applicant LEA may select as its generally comparable group only those LEAs within the 101 (the significantly impacted LEA must be included initially for the purpose of determining the median ADA) that have an ADA above the median ADA, that is, the group of 50. The applicant LEA then recommends to the Secretary as its LCR the rate computed for the group by the SEA. (c) Option 3. Instead of selecting either of the groups described in Options 1 and 2, the applicant LEA may select as its generally comparable group only those LEAs within the 100 that are outside an MSA; that is, the group of 36, after excluding the one significantly impacted LEA. The applicant LEA then recommends to the Secretary as its LCR the rate computed for this group by the SEA. (d) Option 4. Instead of selecting any of the groups described in Options 1, 2, and 3, the applicant LEA may select as its generally comparable group only those LEAs that both have an ADA above the median ADA for the 101 and are outside an MSA; that is, the group of 15. The applicant LEA then recommends to the Secretary as its LCR the rate computed for this group by the SEA. However, as provided in Sec. 222.39(b)(2), if the SEA were to have identified fewer than 10 LEAs under any factor or combination of factors, the SEA would not have computed a rate for such a group. Therefore, an applicant LEA included in such a group would not be able to use this factor or combination of factors in recommending its LCR to the Secretary. The significantly impacted LEA described in Sec. 222.39(b)(1), while included for determining the median ADA, is excluded from the computation of any group's LCR. However, the significantly impacted LEA may recommend for itself the LCR of any group it matches in grade span/legal classification, size, location, or a combination of these factors, (that is, in the case of the significantly impacted LEA referred to in this example, below the median ADA and outside an MSA), provided the group contains at least 10 LEAs that are not significantly impacted. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(b)(1)(C)(iii) and 7703(f)(3)(A)(i)(II) and (III)) Sec. 222.41 How does a State educational agency compute local contribution rates based upon generally comparable local educational agencies? Except as otherwise specified in the Act, the SEA, subject to the Secretary's review and approval, shall compute an LCR for each group of generally comparable LEAs within its State that was identified using the factors in Sec. 222.39, as follows: (a)(1) The SEA shall compile the aggregate local current expenditures of the comparable LEAs in each group for the third fiscal year preceding the fiscal year for which the LCR is being computed. (2) For purposes of this section, the SEA shall consider only those aggregate current expenditures made by the generally comparable LEAs from revenues derived from local sources. No State or Federal funds may be included. (b) The SEA shall compile the aggregate number of children in ADA to whom the generally comparable LEAs in each group provided a free public education during the third fiscal year preceding the fiscal year for which the LCR is being computed. (c) The SEA shall divide-- (1) The aggregate current expenditures determined under paragraph (a) of this section by; (2) The aggregate number of children determined under paragraph (b) of this section. (d) The SEA shall submit the resulting figure as the ``comparable LCR'' to be used by the Secretary under section 8003(b)(1)(C)(iii) in determining the LEA's maximum payment amount under section 8003. (Authority: 20 U.S.C. 7703(b)(1)(C)(iii)) Secs. 222.42-222.49 [Reserved] Subpart D--Payments under Section 8003(d) of the Act for Local Educational Agencies That Serve Children with Disabilities Sec. 222.50 What definitions apply to this subpart? In addition to the terms referenced or defined in Sec. 222.2, the following definitions in 20 U.S.C. 1401 or 34 CFR Sec. 77.1 apply to this subpart: Children with disabilities means children-- (1)(i) With mental retardation, hearing impairments including deafness, speech or language impairments, visual impairments including blindness, serious emotional disturbance, orthopedic impairments, autism, traumatic brain injury, other health impairments, or specific learning disabilities; and (ii) Who, by reason thereof, need special education and related services. (2) The term ``children with disabilities'' for children aged 3 to 5, [[Page 50789]] inclusive, may, at a State's discretion, include children-- (i) Experiencing developmental delays, as defined by the State and as measured by appropriate diagnostic instruments and procedures, in one or more of the following areas: physical development, cognitive development, communication development, social or emotional development, or adaptive development; and (ii) Who, by reason thereof, need special education and related services. Children with specific learning disabilities means children who have a disorder in one or more of the basic psychological processes involved in understanding or in using language, spoken or written, which disorder may manifest itself in imperfect ability to listen, think, speak, read, write, spell, or do mathematical calculations. These disorders include conditions such as perceptual disabilities, brain injury, minimal brain dysfunction, dyslexia, and developmental aphasia. This term does not include children who have learning problems which are primarily the result of visual, hearing, or motor disabilities, of mental retardation, of emotional disturbance, or of environmental, cultural, or economic disadvantage. Free appropriate public education means special education and related services that-- (1) Have been provided at public expense, under public supervision and direction, and without charge; (2) Meet the standards of the State educational agency; (3) Include an appropriate preschool, elementary, or secondary school education in the State involved; and (4) Are provided in conformity with the individualized education program (IEP) required under section 1414(a)(5) of the Individuals with Disabilities Education Act. Individualized education program (IEP) means-- (1) A written statement for each child with a disability developed in any meeting by a representative of the LEA or an intermediate educational unit who shall be qualified to provide, or supervise the provision of, specially designed instruction to meet the unique needs of children with disabilities, the teacher, the parents or guardian of the child, and whenever appropriate, the child, which statement must include-- (i) A statement of the present levels of educational performance of the child; (ii) A statement of annual goals, including short-term instructional objectives; (iii) A statement of the specific educational services to be provided to the child, and the extent to which the child will be able to participate in regular educational programs; (iv) A statement of the needed transition services for students beginning no later than age 16 and annually thereafter (and, when determined appropriate for the individual, beginning at age 14 or younger), including, when appropriate, a statement of the interagency responsibilities or linkages (or both) before the student leaves the school setting; (v) The projected date for initiation and anticipated duration of these services; and (vi) Appropriate objective criteria and evaluation procedures and schedules for determining, on at least an annual basis, whether instructional objectives are being achieved. (2) In the case where a participating agency, other than the educational agency, fails to provide agreed upon services, the educational agency shall reconvene the IEP team to identify alternative strategies to meet the transition objectives. Intermediate educational unit means any public authority, other than an LEA, that is under the general supervision of a State educational agency, that is established by State law for the purpose or providing free public education on a regional basis, and that provides special education and related services to children with disabilities within that State. Preschool means the educational level from a child's birth to the time at which the State provides elementary education. Related services means transportation and those developmental, corrective, and other supportive services (including speech pathology and audiology, psychological services, physical and occupational therapy, recreation, including therapeutic recreation, social work services, counseling services, including rehabilitation counseling, and medical services, except that medical services must be for diagnostic and evaluation purposes only) as may be required to assist a child with a disability to benefit from special education, and includes the early identification and assessment of disabling conditions in children. Special education means specially designed instruction, at no cost to parents or guardians, to meet the unique needs of a child with a disability, including-- (1) Instruction conducted in the classroom, in the home, in hospitals and institutions, and in other settings; and (2) Instruction in physical education. (Authority: 20 U.S.C. 1221e-3(a)(1), 1401, 7703, 7705, 7713; 37 U.S.C. 101) Sec. 222.51 Which children may a local educational agency count for payment under section 8003(d) of the Act? (a) Except as provided in paragraph (b)(2) of this section, the children described in sections 8003(a)(1)(A)(ii), (a)(1)(B), (a)(1)(C), and (a)(1)(D) of the Act who are eligible for services under the provisions of the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) may be counted by the local educational agency (LEA) for the purpose of computing a payment under section 8003(d). (b)(1) An LEA may count a child or children described in paragraph (a) of this section who attend private schools or residential programs if the LEA has placed or referred the child or children in accordance with the provisions of section 613 of the Individuals with Disabilities Education Act, 20 U.S.C. 1400 et seq. and 34 CFR Part 300, subparts C and D. (2) Children who are placed in private schools by their parents may not be counted under section 8003(d), but may participate in public school programs that use section 8003(d) funds. (Authority: 20 U.S.C. 1400 et seq. and 7703(d)) Sec. 222.52 What requirements must a local educational agency meet to receive a payment under section 8003(d)? To receive a payment under section 8003(d), an eligible LEA shall-- (a) State in its application the number of federally connected children with disabilities it claims for a payment under section 8003(d); (b) Have in effect a written IEP for each federally connected child with disabilities claimed for a payment under section 8003(d); and (c) Meet the requirements of subparts A and C of the regulations in this part. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 1400 et seq. and 7703) Sec. 222.53 What restrictions and requirements apply to the use of funds provided under section 8003(d)? (a) An LEA shall use funds provided under section 8003(d) in accordance with the provisions of section 8003(d)(2) and 34 CFR part 300. (b) Obligations and expenditures of section 8003(d) funds may be incurred in either of the two following ways: (1) An LEA may obligate or expend section 8003(d) funds for the fiscal year for which the funds were appropriated. (2) An LEA may reimburse itself for obligations or expenditures of local and general State aid funds for the fiscal year for which the section 8003(d) funds were appropriated. (c) An LEA shall use its section 8003(d) funds for the following types of expenditures: (1) Expenditures that are reasonably related to the conduct of programs or [[Page 50790]] projects for the free appropriate public education of federally connected children with disabilities. These expenditures may include program planning and evaluation but may not include construction of school facilities. (2) Acquisition cost (net invoice price) of equipment required for the free appropriate public education of federally connected children with disabilities. (i) If section 8003(d) funds are used for the acquisition of any equipment described in this paragraph (c)(2) of this section, the fair market value of any financial advantage realized through rebates, discounts, bonuses, free pieces of equipment used in a program or project for the free appropriate public education of federally connected children with disabilities, or other circumstances, is not an allowable expenditure and may not be credited as an expenditure of those funds. (ii) Funds awarded under the provisions of section 8003(d) may be used to acquire equipment for the free appropriate public education of the federally connected children with disabilities only if title to the equipment would be in the applicant agency. (d) An LEA shall account for the use of section 8003(d) funds as follows: (1) By recording, for each fiscal year, the receipt (or credit) of section 8003(d) funds separately from other funds received under the Act, i.e., on a line item basis in the general fund account or in a separate account; and (2) By demonstrating that, for each fiscal year, the amount of expenditures for special education and related services provided to the federally connected children with disabilities is at least equal to the amount of section 8003(d) funds received or credited for that fiscal year. This is done as follows: (i) For each fiscal year determine the amount of an LEA's expenditures for special education and related services provided to all children with disabilities. (ii) The amount determined in paragraph (d)(2)(i) of this section is divided by the average daily attendance (ADA) of the total number of children with disabilities the LEA served during that fiscal year. (iii) The amount determined in paragraph (d)(2)(ii) of this section is then multiplied by the total ADA of the LEA's federally connected children with disabilities claimed by the LEA for that fiscal year. (3) If the amount of section 8003(d) funds the LEA received (or was credited) for the fiscal year exceeds the amount obtained in paragraph (d)(2)(iii) of this section, an overpayment equal to the excess section 8003(d) funds is established. This overpayment may be reduced or eliminated to the extent that the LEA can demonstrate that the average per pupil expenditure for special education and related services provided to federally connected children with disabilities exceeded its average per pupil expenditure for serving non-federally connected children with disabilities. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(d)) Sec. 222.54 What supplement-not-supplant requirement applies to this subpart? Funds provided under section 8003(d) may not supplant any State funds that were or would have been available to the LEA for the free appropriate public education of children counted under section 8003(d). (a) No section 8003(d) funds may be paid to an LEA whose per pupil State aid for federally connected children with disabilities, either general State aid or special education State aid, has been or would be reduced as a result of eligibility for or receipt of section 8003(d) funds, whether or not a State has a program of State aid that meets the requirements of section 8009 of the Act and subpart K of the regulations in this part. (1) A reduction in the per pupil amount of State aid for children with disabilities, including children counted under section 8003(d), from that received in a previous year raises a presumption that supplanting has occurred. (2) The LEA may rebut this presumption by demonstrating that the reduction was unrelated to the receipt of section 8003(d) funds. (b) In any State in which there is only one LEA, all funds for programs for children with disabilities other than funds from Federal sources are considered by the Secretary to be local funds. (Authority: 20 U.S.C. 7703(d)) Sec. 222.55 What other statutes and regulations are applicable to this subpart? Local educational agencies receiving funds under section 8003(d) are subject to the requirements of the Individuals with Disabilities Education Act, and related regulations (20 U.S.C. 1401 et seq. and 34 CFR part 300). (Authority: 20 U.S.C. 1401 et seq., 6314, and 7703(d)) Secs. 222.56 222.59 [Reserved] Subpart E--Additional Assistance for Heavily Impacted Local Educational Agencies under Section 8003(f) of the Act Sec. 222.60 What are the scope and purpose of these regulations? The regulations in this subpart implement section 8003(f) of the Act, which provides financial assistance, in addition to payments under sections 8003(b) and 8003(d) of the Act, to certain heavily impacted local educational agencies (LEAs) that meet all relevant eligibility requirements. (Authority: 20 U.S.C. 7703(f)) Sec. 222.61 What data are used to determine a local educational agency's eligibility and payment under section 8003(f) of the Act? (a) Computations and determinations made with regard to an LEA's eligibility (Secs. 222.61-222.71) and payment (Secs. 222.72-222.73) under section 8003(f) are based on the LEA's final student and financial data for the fiscal year for which it seeks assistance and, in certain cases, final financial data for the preceding and second preceding fiscal years of the LEAs determined under Secs. 222.39-222.41 or Sec. 222.74 to be generally comparable to the applicant LEA (``generally comparable LEAs''). (b) For purposes of this subpart, ``level of education'' means average per pupil expenditure amount. (Authority: 20 U.S.C. 7703(f)) Sec. 222.62 Which local educational agencies are eligible to apply for an additional payment under section 8003(f)? Local educational agencies that are eligible to apply for additional assistance under section 8003(f) include those that have-- (a)(1) A tax effort equal to at least 95 percent of the average tax rate of generally comparable LEAs identified under Secs. 222.39-222.41 or 222.74; and (2)(i) Federally connected children equal to at least 50 percent of the total number of children in average daily attendance (ADA) if a section 8003(b) payment is received on behalf of children described in section 8003(a)(1)(F)-(G); or (ii) Federally connected children equal to at least 40 percent of the total number of children in ADA if a section 8003(b) payment is not received on behalf of children described in section 8003(a)(1)(F)-(G); (b)(1) A tax effort equal to at least 125 percent of the average tax rate of generally comparable LEAs identified under Secs. 222.39- 222.41; and (2) Federally connected children equal to at least 35 percent of the total number of children in ADA; (c) The same boundaries as those of a Federal military installation; or (d) Current expenditures that are not reasonably comparable to those of generally comparable LEAs identified under Secs. 222.39-222.41 because unusual geographical factors affect the applicant LEAs' current expenditures necessary to maintain a level of education equivalent to that of generally comparable LEAs. (Authority: 20 U.S.C. 7703(f)) [[Page 50791]] Sec. 222.63 What other requirements must a local educational agency meet in order to be eligible for financial assistance under section 8003(f)(2)(A)? Subject to Sec. 222.65, an LEA described in Sec. 222.62(a), (b), or (c) is eligible for financial assistance under section 8003(f)(2)(A) if the Secretary determines that the LEA meets all of the following requirements: (a) The LEA is eligible for a basic support payment under section 8003(b). (b) The LEA timely applies for assistance under section 8003(f) and meets all of the other application and eligibility requirements of subparts A and C of these regulations. (c) The LEA is exercising due diligence in availing itself of revenues derived from State and other sources and, except for an LEA described in Sec. 222.62(c), is making a reasonable tax effort in accordance with the requirements of Secs. 222.66 - 222.71. (d) The eligibility of the LEA for State aid and the amount of State aid are determined on a basis no less favorable than that for other LEAs in the State. (Authority: 20 U.S.C. 7703(f)) Sec. 222.64 What other requirements must a local educational agency meet in order to be eligible for financial assistance under section 8003(f)(2)(B)? Subject to Sec. 222.65, an LEA described in Sec. 222.62(d) is eligible for financial assistance under section 8003(f)(2)(B) if the Secretary determines that the LEA meets all of the following requirements-- (a) The LEA complies with the requirements of Sec. 222.63(a)-(d). (b)(1) As part of its section 8003(f) application, the LEA provides the Secretary with documentation that demonstrates that the LEA is unable to provide a level of education equivalent to that provided by its generally comparable LEAs because-- (i) The applicant's current expenditures are affected by unusual geographical factors; and (ii) As a result, those current expenditures are not reasonably comparable to the current expenditures of its generally comparable LEAs. (2) The LEA's application must include-- (i) A specific description of the unusual geographical factors on which the applicant is basing its request for compensation under this section and objective data demonstrating that the applicant is more severely affected by these factors than any other LEA in its State; (ii) Objective data demonstrating the specific ways in which the unusual geographical factors affect the applicant's current expenditures so that they are not reasonably comparable to the current expenditures of its generally comparable LEAs; (iii) Objective data demonstrating the specific ways in which the unusual geographical factors prevent the applicant from providing a level of education equivalent to that provided by its generally comparable LEAs; and (iv) Any other information that the Secretary may require to make an eligibility determination under this section. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(f)) Sec. 222.65 How may a State aid program affect a local educational agency's eligibility for assistance under section 8003(f)? The Secretary determines that an LEA is not eligible for financial assistance under section 8003(f) if-- (a) The LEA is in a State that has an equalized program of State aid that meets the requirements of section 8009; and (b) The State, in determining the LEA's eligibility for or amount of State aid, takes into consideration the LEA's payment under section 8003(f). (Authority: 20 U.S.C. 7703(f)) Sec. 222.66 How does the Secretary determine whether a fiscally independent local educational agency is making a reasonable tax effort? (a) To determine whether a fiscally independent LEA, as defined in Sec. 222.2(c), is making a reasonable tax effort as required by Secs. 222.63 or 222.64, the Secretary compares the LEA's local real property tax rates for current expenditure purposes (referred to in this part as ``tax rates''), as defined in Sec. 222.2(c), with the tax rates of its generally comparable LEAs. (b) For purposes of this section, the Secretary uses-- (1) Actual tax rates if all the real property in the LEA and its generally comparable LEAs is assessed at the same percentage of true value; or (2) Tax rates computed under Secs. 222.67-222.69. (c) The Secretary determines that an LEA described in Sec. 222.62(a) or (d) is making a reasonable tax effort if-- (1) The LEA's tax rate is equal to at least 95 percent of the average tax rate of its generally comparable LEAs; (2) Each of the LEA's tax rates for each classification of real property is equal to at least 95 percent of each of the average tax rates of its generally comparable LEAs for the same classification of property; (3) The LEA taxes all of its real property at the maximum rates allowed by the State, if those maximum rates apply uniformly to all LEAs in the State; or (4) The LEA has no taxable real property. (d) The Secretary determines that an LEA described in Sec. 222.62(b) is making a reasonable tax effort if-- (1) The LEA's tax rate is equal to at least 125 percent of the average tax rate of its generally comparable LEAs; (2) Each of the LEA's tax rates for each classification of real property is equal to at least 125 percent of each of the average tax rates of its generally comparable LEAs for the same classification of property; (3) The LEA taxes all of its real property at the maximum rates allowed by the State, if those maximum rates apply uniformly to all LEAs in the State; or (4) The LEA has no taxable real property. (Authority: 20 U.S.C. 7703(f)) Sec. 222.67 What tax rates does the Secretary use if real property is assessed at different percentages of true value? If the real property of an LEA and its generally comparable LEAs consists of one classification of property but the property is assessed at different percentages of true value in the different LEAs, the Secretary determines whether the LEA is making a reasonable tax effort under Sec. 222.66(c)(1) or (d)(1) by using tax rates computed by-- (a) Multiplying the LEA's actual tax rate for real property by the percentage of true value assigned to that property for tax purposes; and (b) Performing the computation in paragraph (a) of this section for each of its generally comparable LEAs and determining the average of those computed tax rates. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(f)) Sec. 222.68 What tax rates does the Secretary use if two or more different classifications of real property are taxed at different rates? If the real property of an LEA and its generally comparable LEAs consists of two or more classifications of real property taxed at different rates, the Secretary determines whether the LEA is making a reasonable tax effort under Sec. 222.66(c)(1) or (2) or Sec. 222.66(d)(1) or (2) by using one of the following: (a) Actual tax rates for each of the classifications of real property. (b) Tax rates computed in accordance with Sec. 222.67 for each of the classifications of real property. (c) Tax rates computed by-- (1) Determining the total true value of all real property in the LEA by dividing the assessed value of each classification of real property in the LEA by the percentage of true value assigned to that property for tax purposes and aggregating the results; (2) Determining the LEA's total revenues derived from local real property taxes for current expenditures (as defined in section 8013); [[Page 50792]] (3) Dividing the amount determined in paragraph (c)(2) of this section by the amount determined in paragraph (c)(1) of this section; and (4) Performing the computations in paragraphs (c)(1), (2), and (3) of this section for each of the generally comparable LEAs and determining the average of their computed tax rates. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(f)) Sec. 222.69 What tax rates may the Secretary use if substantial local revenues are derived from local tax sources other than real property taxes? (a) In a State in which a substantial portion of revenues for current expenditures for educational purposes is derived from local tax sources other than real property taxes, the State educational agency (SEA) may request that the Secretary take those revenues into account in determining whether an LEA in that State is making a reasonable tax effort under Sec. 222.66. (b) If, based upon the request of an SEA, the Secretary determines that it is appropriate to take the revenues described in paragraph (a) of this section into account in determining whether an LEA in that State is making a reasonable tax effort under Sec. 222.66, the Secretary uses tax rates computed by-- (1) Dividing the assessed value of each classification of real property in the LEA by the percentage of true value assigned to that property for tax purposes and aggregating the results; (2) Determining the LEA's total revenues derived from local tax sources for current expenditures (as defined in section 8013); (3) Dividing the amount determined in paragraph (b)(2) of this section by the amount determined in paragraph (b)(1) of this section; and (4) Performing the computations in paragraphs (b)(1), (2), and (3) of this section for each of the generally comparable LEAs and determining the average of those computed tax rates. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(f)) Sec. 222.70 How does the Secretary determine whether a fiscally dependent local educational agency is making a reasonable tax effort? (a) If an LEA is fiscally dependent, as defined in Sec. 222.2(c), the Secretary compares the LEA's imputed local tax rate, calculated under paragraph (b) of this section, with the average tax rate of its generally comparable LEAs, calculated under paragraph (c) of this section, to determine whether the LEA is making a reasonable tax effort. (b) The Secretary imputes a local tax rate for a fiscally dependent LEA by-- (1) Dividing the assessed value of each classification of real property within the boundaries of the general government by the percentage of true value assigned to that property for tax purposes and aggregating the results; (2) Determining the amount of locally derived revenues made available by the general government for the LEA's current expenditures (as defined in section 8013); and (3) Dividing the amount determined in paragraph (b)(2) of this section by the amount determined in paragraph (b)(1) of this section. (c) The Secretary performs the computations in paragraph (b) of this section for each of the fiscally dependent generally comparable LEAs and the computations in Secs. 222.67-222.69, whichever is applicable, for each of the fiscally independent generally comparable LEAs and determines the average of all those tax rates. (d) The Secretary determines that a fiscally dependent LEA described in Sec. 222.62 (a) or (d) is making a reasonable tax effort if its imputed local tax rate is equal to at least 95 percent of the average tax rate of its generally comparable LEAs. (e) The Secretary determines that a fiscally dependent LEA described in Sec. 222.62(b) is making a reasonable tax effort if its imputed local tax rate is equal to at least 125 percent of the average tax rate of its generally comparable LEAs. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(f)) Sec. 222.71 What information must be provided by the State educational agency? The SEA of any State with an LEA applying for assistance under section 8003(f) shall provide the Secretary with relevant information necessary to determine whether the LEA is making a reasonable tax effort under Secs. 222.67-222.70, whichever is applicable. (Approved by the Office of Management and Budget under control number 1810-0036.) (Authority: 20 U.S.C. 7703(f)) Sec. 222.72 How does the Secretary determine a maximum payment for local educational agencies that are eligible for financial assistance under section 8003(f)(2)(A) and Sec. 222.63? (a) Except as otherwise provided in paragraphs (b) through (c) of this section or Sec. 222.76, the Secretary determines a maximum payment under section 8003(f)(2)(A) for an eligible LEA by-- (1) First calculating the greater of-- (i) The State average per pupil expenditure (APPE) or the national APPE; (ii) The APPE of generally comparable LEAs identified under Secs. 222.39-222.41; or (iii) The APPE of three generally comparable LEAs identified under Sec. 222.74; (2) Next subtracting from the amount calculated in paragraph (a)(1) of this section the average State aid per pupil amount received by the LEA; (3) Multiplying the amount calculated in paragraph (a)(2) of this section by the total number of federally connected students in ADA who are eligible for basic support payments under section 8003(b); (4) In the case of an LEA whose tax rate is at least 95 percent but less than 100 percent of the average tax rate of its generally comparable LEAs, reducing the amount calculated in paragraph (a)(3) of this section by the percentage that the average tax rate of its generally comparable LEAs exceeds the tax rate of the LEA; and (5) Subtracting from the amount calculated in paragraph (a)(3), or paragraph (a)(4) of this section, the total amount of payments received by the eligible LEA under sections 8003 (b) and (d) for the fiscal year for which a payment is being determined under section 8003(f). (b) For the first step of the computations described in paragraph (a) of this section, the Secretary calculates a maximum payment under section 8003(f)(2)(A) for an eligible LEA described in Sec. 222.62 (b) or (c) by multiplying the national APPE by .70, except that the resulting amount may not exceed 125 percent of the State APPE. (c) For the fourth step of the computations described in paragraph (a) of this section, generally comparable LEAs for reasonable tax effort purposes are the LEAs whose APPE is identified in Sec. 222.72(a)(1) except that for applicant LEAs for whom the national APPE is identified, all LEAs in the applicant's State will be used as generally comparable LEAs for reasonable tax effort purposes. (Authority: 20 U.S.C. 7703(f)) Sec. 222.73 How does the Secretary determine a maximum payment for local educational agencies that are eligible for financial assistance under section 8003(f)(2)(B) and Sec. 222.64? Except as otherwise provided in paragraphs (b) and (c) of this section and Sec. 222.76, the Secretary determines a maximum payment under section 8003(f)(2)(B) for an eligible LEA as follows: (a) The Secretary increases the eligible LEA's local contribution rate (LCR) for section 8003(b) payment purposes up to the amount the Secretary determines will compensate the applicant for the increase in its current expenditures necessitated by the unusual geographical factors identified under Sec. 222.64(b)(2), but no more than is [[Page 50793]] necessary to allow the applicant to provide a level of education equivalent to that provided by its generally comparable LEAs. (b) The increase in the LCR referred to in paragraph (a) of this section may not exceed the per pupil share (computed with regard to all children in ADA), as determined by the Secretary, of the increased current expenditures necessitated by the unusual geographical factors identified under Sec. 222.64(b)(2). (c) In the case of an LEA whose tax rate is at least 95 percent but less than 100 percent of the average tax rate of its generally comparable LEAs, reducing the amount calculated in paragraph (a) of this section by the percentage that the average tax rate of its generally comparable LEAs exceeds the tax rate of the LEA. (Authority: 20 U.S.C. 7703(f)) Sec. 222.74 How does the Secretary identify generally comparable local educational agencies for purposes of section 8003(f)? (a) Except as otherwise provided in paragraph (b) of this section, the Secretary identifies generally comparable LEAs for purposes of this subpart in accordance with the LCR procedures described in Secs. 222.39-222.41. (b) For applicant LEAs described in Sec. 222.62(a), to identify the three generally comparable LEAs referred to in Sec. 222.72(a)(1)(iii), the Secretary uses the following procedures: (1) The Secretary asks the SEA of the applicant LEA to identify generally comparable LEAs in the State by first following the directions in Sec. 222.39(a)(4), using data from the preceding fiscal year. The SEA then removes from the resulting list any LEAs that are significantly impacted, as described in Sec. 222.39(b)(1), except the applicant LEA. (2) If the remaining LEAs are not in rank order by total ADA, the SEA shall list them in that order. (3) The LEA may then select as its generally comparable LEAs, for purposes of section 8003(f) only, three LEAs from the list that are closest to it in size as determined by total ADA (e.g., the next three larger LEAs, the next three smaller, the next two larger and the next one smaller, or the next one larger and the next two smaller). (Authority: 20 U.S.C. 7703(f)) Sec. 222.75 How does the Secretary compute the average per pupil expenditure of generally comparable local educational agencies under this subpart? The Secretary computes APPE under this subpart by-- (a) Dividing the sum of the total current expenditures for the preceding fiscal year for the identified generally comparable LEAs by the sum of the total ADA of those LEAs for the same fiscal year and performing this calculation again using data for the second preceding year; and (b) Increasing or decreasing the APPE for the preceding fiscal year by the percentage the APPE of the generally comparable LEAs increased or decreased from the second preceding fiscal year to the preceding fiscal year. (Authority: 20 U.S.C. 7703(f)) Sec. 222.76 What does the Secretary do if appropriation levels are insufficient to pay in full the amounts calculated under Secs. 222.72 and 222.73? Payments under section 8003(f) for eligible LEAs will be ratably reduced if the funds available for assistance under that section are insufficient to pay the full amounts determined under Secs. 222.72 and 222.73. (Authority: 20 U.S.C. 7703(f)) Secs. 222.77-222.79 [Reserved] Subpart F--[Reserved] Subpart G--Special Provisions for Local Educational Agencies That Claim Children Residing on Indian Lands General Sec. 222.90 What definitions apply to this subpart? In addition to the definitions in Sec. 222.2, the following definitions apply to this subpart: Indian children means children residing on Indian lands who are recognized by an Indian tribe as being affiliated with that tribe. Indian tribe means any Indian tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or village corporation as defined in or established under the Alaska Native Claims Settlement Act (85 Stat. 688), which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. (Authority: 20 U.S.C. 7713, 7881, 7938, 8801) Sec. 222.91 What requirements must a local educational agency meet to receive a payment under section 8003 of the Act for children residing on Indian lands? To receive a payment under section 8003 of the Act for children residing on Indian lands, a local educational agency (LEA) must-- (a) Meet the application and eligibility requirements in section 8003 and subparts A and C of these regulations; (b) Develop and implement policies and procedures in accordance with the provisions of section 8004(a) of the Act; and (c) Include in its application for payments under section 8003-- (1) An assurance that the LEA established these policies and procedures in consultation with and based on information from tribal officials and parents of those children residing on Indian lands who are Indian children; and (2) A copy of the policies and procedures or documentation that the LEA has received a waiver in accordance with the provisions of section 8004(c). (Authority: 20 U.S.C. 7703(a), 7704(a), (c), and (d)(2)) Sec. 222.92 What additional statutes and regulations apply to this subpart? (a) The following statutes and regulations apply to LEAs that claim children residing on Indian lands for payments under section 8003: (1) The General Education Provisions Act (GEPA) in 20 U.S.C. 1221 et seq., unless otherwise noted. (2) Other relevant regulations in this part. (b) The following statutes, rules, and regulations do not apply to any hearing proceedings under this subpart: (1) Administrative Procedure Act. (2) Federal Rules of Civil Procedure. (3) Federal Rules of Evidence. (4) GEPA, Part E. (5) 34 CFR Part 81. (Authority: 20 U.S.C. 1221 et seq. unless otherwise noted, 7703, and 7704) Sec. 222.93 [Reserved] Indian Policies and Procedures Sec. 222.94 What provisions must be included in a local educational agency's Indian policies and procedures? (a) An LEA's Indian policies and procedures (IPPs) must include a description of the specific procedures for how the LEA will-- (1) Give the tribal officials and parents of Indian children an opportunity to comment on whether Indian children participate on an equal basis with non-Indian children in the education programs and activities provided by the LEA; (2) Assess the extent to which Indian children participate on an equal basis with non-Indian children served by the LEA; (3) Modify, if necessary, its education program to ensure that Indian children participate on an equal basis with non-Indian children served by the LEA; (4) Disseminate relevant applications, evaluations, program plans and information related to the education programs of the LEA in sufficient time to allow the tribes and parents of Indian children an opportunity to review the materials and make recommendations on the needs of the Indian children and how the LEA may help those children realize the benefits of the LEA's education programs and activities; (5) Gather information concerning Indian views, including those regarding [[Page 50794]] the frequency, location, and time of meetings; (6) Notify the Indian parents and tribes of the locations and times of meetings; (7) Consult and involve tribal officials and parents of Indian children in the planning and development of the LEA's education programs and activities; and (8) Modify the IPPs if necessary, based upon the results of any assessment described in paragraph (b) of this section. (b) Tribes and parents of Indian children may assess the effectiveness of their input regarding the participation of Indian children in the LEA's education programs and activities and the development and implementation of the IPPs, and share the results of that assessment with the LEA. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704) Sec. 222.95 How are Indian policies and procedures reviewed to ensure compliance with the requirements in section 8004(a) of the Act? (a) The Director of the Impact Aid Program (Director) periodically reviews applicant LEAs' IPPs to ensure that they comply with the provisions of section 8004(a) and Sec. 222.94. (b) If the Director determines either that the LEA's IPPs do not comply with the minimum standards of section 8004(a), or that the IPPs have not been implemented in accordance with Sec. 222.94, the Director provides the LEA with written notification of the deficiencies related to its IPPs and requires that the LEA take appropriate action. (c) An LEA shall make the necessary changes within 60 days of receipt of written notification from the Director. (d) If the LEA fails to make the necessary adjustments or changes within the prescribed period of time, the Director may withhold all payments that the LEA is eligible to receive under section 8003. (e) Each LEA that has developed IPPs shall review those IPPs annually to ensure that they-- (1) Comply with the provisions in section 8004(a); and (2) Are implemented by the LEA in accordance with Sec. 222.94. (f) If an LEA determines that its IPPs do not meet the requirements in paragraphs (e) (1) and (2) of this section, the LEA shall amend its IPPs to conform with those requirements within 60 days of its determination. (g) An LEA that amends its IPPs shall send a copy of the amended IPPs to-- (1) The Director for approval; and (2) The affected tribe or tribes. (Authority: 20 U.S.C. 1221e-3(a)(1), 7704 (a) and (d)(2)) Secs. 222.96-222.101 [Reserved] Indian Policies and Procedures Complaint and Hearing Procedures Sec. 222.102 Who may file a complaint about a local educational agency's Indian policies and procedures? (a) Only a tribal chairman or an authorized designee for a tribe that has students attending an LEA's schools may file a written complaint with the Assistant Secretary for Elementary and Secondary Education (Assistant Secretary) regarding any action of the LEA pursuant to, or relevant to, section 8004(a) and Sec. 222.94. (b) If a tribe files a complaint through a designee, the tribe shall acknowledge in writing in the complaint that the designee is authorized to act on its behalf. (Authority: 20 U.S.C. 7704(e)(1)) Sec. 222.103 What must be included in a complaint? For purposes of this subpart, a complaint is a signed statement that includes-- (a) An allegation that an LEA has failed to develop and implement IPPs in accordance with section 8004(a); (b) Information that supports the allegation; (c) A specific request for relief; and (d) A statement describing what steps the tribe has taken to resolve with the LEA the matters on which the complaint is based. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)(1)) Sec. 222.104 When does the Assistant Secretary consider a complaint received? (a) The Assistant Secretary considers a complaint to have been received only after the Assistant Secretary determines that the complaint-- (1) Satisfies the requirements in Secs. 222.102 and 222.103; and (2) Is in writing and signed by the tribal chairman or the tribe's authorized designee. (b) If the Assistant Secretary determines that a complaint fails to meet the requirements in Secs. 222.102-222.103, the Assistant Secretary notifies the tribe or its designee in writing that the complaint has been dismissed for purposes of invoking the hearing procedures in Secs. 222.102-222.113. (c) Any notification that a complaint has been dismissed includes the reasons why the Assistant Secretary determined that the complaint did not meet the requirements in Secs. 222.102 and 222.103. (d) Notification that a complaint has been dismissed does not preclude other efforts to investigate or resolve the issues raised in the complaint, including the filing of an amended complaint. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)(1)) Sec. 222.105-222.107 [Reserved] Sec. 222.108 What actions must be taken upon receipt of a complaint? Within 10 working days of receipt of a complaint, the Secretary or his designee-- (a) Designates a hearing examiner to conduct a hearing; (b) Designates a time for the hearing that is no more than 30 days after the designation of a hearing examiner; (c) Designates a place for the hearing that, to the extent possible, is-- (1) Near the LEA; or (2) At another location convenient to the tribe and the LEA, if it is determined that there is good cause to designate another location; (d) Notifies the tribe and the LEA of the time, place, and nature of the hearing; and (e) Transmits copies of the complaint to the LEA and the affected tribe or tribes. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)) Sec. 222.109 When may a local educational agency reply to a complaint? An LEA's reply to the charges in the complaint must be filed with the hearing examiner within 15 days of the date the LEA receives a copy of the notice and complaint described in Sec. 222.108 (d) and (e) from the hearing examiner. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)) Sec. 222.110 What are the procedures for conducting a hearing on a local educational agency's Indian policies and procedures? Hearings on IPP complaints filed by an Indian tribe or tribes against an LEA are conducted as follows: (a) The hearing must be open to the public. (b) Parties may be represented by counsel. (c)(1) Each party may submit oral and written testimony that is relevant to the issues in the proceeding and make recommendations concerning appropriate remedial actions. (2) A party may object to evidence it considers to be irrelevant or unduly repetitious. (d) No party shall communicate orally or in writing with the hearing examiner or the Assistant Secretary on matters under review, except minor procedural matters, unless all parties to the complaint are given-- (1) Timely and adequate notice of the communication; and (2) Reasonable opportunity to respond. (e) For each document that a party submits, the party shall-- (1) File one copy for inclusion in the record of the proceeding; and (2) Provide a copy to each of the other parties to the proceeding. [[Page 50795]] (f) Each party shall bear only its own costs in the proceeding. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)) Sec. 222.111 What is the authority of the hearing examiner in conducting a hearing? The hearing examiner is authorized to conduct a hearing under section 8004(e) and Secs. 222.109-222.113 as follows: (a) The hearing examiner may-- (1) Clarify, simplify, or define the issues or consider other matters that may aid in the disposition of the complaint; (2) Direct the parties to exchange relevant documents or information; and (3) Examine witnesses. (b) The hearing examiner-- (1) Regulates the course of proceedings and conduct of the parties; (2) Arranges for the preparation of a transcript of each hearing and provides one copy to each party; (3) Schedules the submission of oral and documentary evidence; (4) Receives, rules on, excludes, or limits evidence; (5) Establishes and maintains a record of the proceeding, including any transcripts referenced above; (6) Establishes reasonable rules governing public attendance at the proceeding; and (7) Is bound by all applicable statutes and regulations and may neither waive them nor rule them invalid. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)) Sec. 222.112 What procedures are followed after the hearing? (a) Each party may submit to the hearing examiner additional evidence that is relevant to the issues raised at the hearing, within the time period and in the manner specified by the hearing examiner. (b) Within 30 days after the hearing, the hearing examiner-- (1) Makes, on the basis of the record, written findings of fact and recommendations concerning any appropriate remedial action that should be taken; (2) Submits those findings and recommendations, along with the hearing record, to the Assistant Secretary; and (3) Sends a copy of those findings and recommendations to each party. (c)(1) Each party may file with the Assistant Secretary comments on the hearing examiner's findings and recommendations. (2) The comments must be received by the Assistant Secretary within 10 days after the party receives a copy of the hearing examiner's findings and recommendations. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)) Sec. 222.113 What are the responsibilities of the Assistant Secretary after the hearing? (a) Within 30 days after receiving the entire hearing record and the hearing examiner's findings and recommendations, the Assistant Secretary makes, on the basis of the record, a written determination that includes-- (1) Any appropriate remedial action that the LEA must take; (2) A schedule for completing any remedial action; and (3) The reasons for the Assistant Secretary's decision. (b) After completing the final determination required by paragraph (a) of this section, the Assistant Secretary sends the parties a copy of that determination. (c) The Assistant Secretary's final determination under paragraph (a) of this section is the final action of the Department concerning the complaint and is subject to judicial review. (Authority: 20 U.S.C. 1221e-3(a)(1) and 7704(e)) Secs. 222.114-222.129 [Reserved] Subpart H--[Reserved] Subpart I--Facilities Assistance and Transfers Under Section 8008 of the Act Sec. 222.140 What definitions apply to this subpart? In addition to the terms referenced or defined in Sec. 222.2, the following definitions apply to this subpart: Minimum school facilities means those school facilities for which the Secretary may provide assistance under this part as follows: (1) The Secretary, after consultation with the State educational agency and the local educational agency (LEA), considers these facilities necessary to support an educational program-- (i) For the membership of students residing on Federal property to be served at normal capacity; and (ii) In accordance with applicable Federal and State laws and, if necessary or appropriate, common practice in the State. (2) The term includes, but is not restricted to-- (i) Classrooms and related facilities; and (ii) Machinery, utilities, and initial equipment, to the extent that these are necessary or appropriate for school purposes. Providing assistance means constructing, leasing, renovating, remodeling, rehabilitating, or otherwise providing minimum school facilities. (Authority: 20 U.S.C. 7708) Sec. 222.141 For what types of projects may the Secretary provide assistance under section 8008 of the Act? The types of projects for which the Secretary may provide assistance under section 8008 of the Act during any given year include, but are not restricted to, one or more of the following: (a)(1) Emergency repairs to existing facilities for which the Secretary is responsible under section 8008. (2) As used in this section, the term ``emergency repairs'' means those repairs necessary-- (i) For the health and safety of persons using the facilities; (ii) For the removal of architectural barriers to the disabled; or (iii) For the prevention of further deterioration of the facilities. (b) Renovation of facilities for which the Secretary is responsible under section 8008 to meet the standards of minimum school facilities in exchange for an LEA or another appropriate entity accepting transfer of the Secretary's interest in them under Sec. 222.143. (c) Provision of temporary facilities on Federal property pending emergency repairs. (d) Construction of replacement minimum school facilities when more cost-effective than renovation and when the replacement facilities are to be transferred to local ownership under Sec. 222.143. (Authority: 20 U.S.C. 7708) Sec. 222.142 What terms and conditions apply to minimum school facilities operated under section 8008 by another agency? When minimum school facilities are provided under section 8008, the Secretary may-- (a) Arrange for the operation of the facilities by an agency other than the Department; (b) Establish terms and conditions for the operation of the facilities; and (c) Require the operating agency to submit assurances and enter into other arrangements that the Secretary specifies. (Authority: 20 U.S.C. 7708) Sec. 222.143 What terms and conditions apply to the transfer of minimum school facilities? When the Secretary transfers to an LEA or other appropriate entity (transferee) facilities that have been used to carry out the purposes of section 10 of Pub. L. 81-815 or section 8008, the Secretary establishes appropriate terms and conditions for the transfer including that it be-- (a) Without charge; and (b) Consented to by the transferee. (Authority: 20 U.S.C. 7708) [[Page 50796]] Secs. 222.144-222.149 [Reserved] Subpart J--Impact Aid Administrative Hearings and Judicial Review Under Section 8011 of the Act Sec. 222.150 What is the scope of this subpart? (a) Except as provided in paragraph (b) of this section, the regulations in this subpart govern all Impact Aid administrative hearings under section 8011(a) of the Act and requests for reconsideration. (b) Except as otherwise indicated in this part, the regulations in this subpart do not govern the following administrative hearings: (1) Subpart G, Secs. 222.90-222.114 (Indian policies and procedures tribal complaint and withholding hearings. (2) Subpart K, Sec. 222.165 (hearings concerning determinations under section 8009 of the Act). (Authority: 20 U.S.C. 7711(a)) Sec. 222.151 is an administrative hearing provided to a local educational agency? (a) Any local educational agency (LEA) that is adversely affected by the Secretary's (or the Secretary's delegatee's) action or failure to act upon the LEA's application under the Act or Pub. L. 81-874 is entitled to an administrative hearing in accordance with this subpart. (b) An applicant is entitled to an administrative hearing under this subpart only if-- (1) The applicant files a written request for an administrative hearing within 60 days of its receipt of written notice of the adverse action; and (2) The issues of fact or law specified in the hearing request are material to the determination of the applicant's rights and are not committed wholly to the discretion of the Secretary. (Authority: 20 U.S.C. 7711(a)) Sec. 222.152 When may a local educational agency request reconsideration of a determination? (a)(1) An LEA may request reconsideration of any determination made by the Secretary (or the Secretary's delegatee) under the Act or Pub. L. 81-874, either in addition to or instead of requesting an administrative hearing under Sec. 222.151. (2) A request for reconsideration, or actual reconsideration by the Secretary (or the Secretary's delegatee), does not extend the time within which an applicant must file a request for an administrative hearing under Sec. 222.151, unless the Secretary (or the Secretary's delegatee) extends that time limit in writing. (b) The Secretary's consideration of a request for reconsideration is not prejudiced by a pending request for an administrative hearing on the same matter, or the fact that a matter has been scheduled for a hearing. The Secretary (or the Secretary's delegatee) may, but is not required to, postpone the administrative hearing due to a request for reconsideration. (c) The Secretary may reconsider any determination under the Act or Pub. L. 81-874 concerning a particular party unless the determination has been the subject of an administrative hearing under this part with respect to that party. (Authority: 20 U.S.C. 7711(a)) Sec. 222.153 How must a local educational agency request an administrative hearing? An applicant requesting a hearing in accordance with this subpart must-- (a)(1) If it mails the hearing request, address it to the Secretary, c/o Director, Impact Aid Program, 600 Independence Ave., SW, Portals 4200, Washington, DC 20202-6244; or (2) If it hand-delivers the hearing request, deliver it to the Director, Impact Aid Program, Portals Building, Room 4200, 1250 Maryland Avenue, SW, Washington DC; (b) Clearly specify in its written hearing request the issues of fact and law to be considered; and (c) Furnish a copy of its hearing request to its State educational agency (SEA) (unless the applicant is an SEA). (Authority: 20 U.S.C. 7711(a)) Sec. 222.154 How must written submissions under this subpart be filed? (a) All written submissions under this subpart must be filed by hand-delivery, mail, or facsimile transmission. The Secretary discourages the use of facsimile transmission for documents longer than five pages. (b) If agreed upon by the parties, a party may serve a document upon the other party or parties by facsimile transmission. (c) The filing date for a written submission under this subpart is the date the document is-- (1) Hand-delivered; (2) Mailed; or (3) Sent by facsimile transmission. (d) A party other than the Department filing by facsimile transmission is responsible for confirming that a complete and legible copy of the document was received by the Department, including by the administrative law judge (ALJ). (e) If a document is filed by facsimile transmission, the Secretary or ALJ, as applicable, may require the filing of a follow-up hard copy by hand-delivery or by mail within a reasonable period of time. (Authority: 20 U.S.C. 7711(a)) Sec. 222.155 When and where is an administrative hearing held? Administrative hearings under this subpart are held at the offices of the Department in Washington, DC, at a time fixed by the ALJ, unless the ALJ selects another place based upon the convenience of the parties. (Authority: 20 U.S.C. 7711(a)) Sec. 222.156 How is an administrative hearing conducted? Administrative hearings under this subpart are conducted as follows: (a) The administrative hearing is conducted by an ALJ appointed under 5 U.S.C. 3105, who issues rules of procedure that are proper and not inconsistent with this subpart. (b) The parties may introduce all relevant evidence on the issues stated in the applicant's request for hearing or on other issues determined by the ALJ during the proceeding. The application in question and all amendments and exhibits must be made part of the hearing record. (c) Technical rules of evidence, including the Federal Rules of Evidence, do not apply to hearings conducted under this subpart, but the ALJ may apply rules designed to assure production of the most credible evidence available, including allowing the cross-examination of witnesses. (d) Each party may examine all documents and other evidence offered or accepted for the record, and may have the opportunity to refute facts and arguments advanced on either side of the issues. (e) A transcript must be made of the oral evidence unless the parties agree otherwise. (f) Each party may be represented by counsel. (g) The hearing examiner is bound by all applicable statutes and regulations and may neither waive them nor rule them invalid. (Authority: 5 U.S.C. 556 and 3105; 20 U.S.C. 7711(a)) Sec. 222.157 What procedures apply for issuing or appealing an administrative law judge's decision under section 8011(a) of the Act? (a) Decision. An ALJ must issue a decision under section 8011(a) as follows: (1) Based upon the hearing record, the ALJ-- (i) Makes written findings and an initial decision; or (ii) Makes recommended findings and a proposed decision, and certifies the entire record to the Secretary for a final decision. (2) The ALJ mails to each party a copy of-- (i) The written findings and initial decision; or (ii) The certified record, recommended findings, and proposed decision. (3) An ALJ's initial decision constitutes the Secretary's final decision [[Page 50797]] without any further proceedings unless-- (i) The applicant, within the time limits stated in paragraph (c)(1) of this section, requests the Secretary to review the decision and that request is granted; or (ii) The Secretary otherwise determines, within the time limits stated in paragraph (c)(2) of this section, to review the initial decision. (b) Administrative appeal of an initial decision. (1) The applicant may, within 30 days of the date of the receipt of an initial decision, request the Secretary to review that decision. (2) The Secretary may-- (i) Grant or deny a timely request for review of an initial decision; or (ii) Otherwise determine to review the decision, so long as that determination is made within 45 days of the date of receipt of the initial decision. (3) The Secretary mails to each party written notice of-- (i) The Secretary's action granting or denying a request for review of an initial decision; or (ii) The Secretary's determination to review an initial decision. (Authority: 20 U.S.C. 7711(a)) Sec. 222.158 What procedures apply to the Secretary's review of an initial decision or certified record? When the Secretary reviews an initial decision or certified record (including the ALJ's proposed findings and recommended decision), the Secretary-- (a) Notifies the applicant in writing that it may file a written statement or comments; and (b) Promptly gives to each party written notice of the Secretary's final decision. (Authority: 20 U.S.C. 7711(a)) Sec. 222.159 When and where does a party seek judicial review? If an LEA or a State that is aggrieved by the Secretary's final decision following an administrative hearing proceeding under this subpart wishes to seek judicial review, the LEA or State must, within 60 days after receiving notice of the Secretary's final decision, file with the United States Court of Appeals for the circuit in which that LEA or State is located a petition for review of the final agency action, in accordance with section 8011(b) of the Act. (Authority: 20 U.S.C. 7711(b)) Subpart K--Determinations Under Section 8009 of the Act Sec. 222.160 What are the scope and purpose of this subpart? (a) Scope. This subpart applies to determinations made by the Secretary under section 8009 of the Act. (b) Purpose. The sole purpose of the regulations in this subpart is to implement the provisions of section 8009. The definitions and standards contained in this subpart apply only with respect to section 8009 and do not establish definitions and standards for any other purpose. (Authority: 20 U.S.C. 7709) Sec. 222.161 How is State aid treated under section 8009 of the Act? (a) General rules. (1) A State may take into consideration payments under sections 8002 and 8003(b) of the Act (including hold harmless payments calculated under section 8003(e)) in allocating State aid if that State has a State aid program that qualifies under Sec. 222.162, except as follows: (i) Those payments may be taken into consideration for each affected local educational agency (LEA) only in the proportion described in Sec. 222.163. (ii) A State may not take into consideration that portion of an LEA's payment that is generated by the portion of a weight in excess of one under section 8003(a)(2)(B) of the Act (children residing on Indian lands) or payments under section 8003(d) of the Act (children with disabilities), section 8003(f) of the Act (heavily impacted LEAs) and section 8003(g) of the Act (LEAs with high concentrations of children with severe disabilities). (iii) A State may not take into consideration increases in payment under the following subsections of section 3(d) of Pub. L. 81-874: (A) Section 3(d)(2)(B) (increase for heavily impacted LEAs). (B) Section 3(d)(2)(C) (increase for children with disabilities and children with specific learning disabilities). (C) Section 3(d)(2)(D) (increase for children residing on Indian lands). (D) Section 3(d)(3)(B)(ii) (increase for unusual geographical factors). (2) No State aid program may qualify under this subpart if a court of that State has determined by final order, not under appeal, that the program fails to equalize expenditures for free public education among LEAs within the State or otherwise violates law, and if the court's order provides that the program is no longer in effect. (3) No State, whether or not it has an equalization program that qualifies under Sec. 222.162, may, in allocating State aid, take into consideration an LEA's eligibility for payments under the Act if that LEA does not apply for and receive those payments. (4) Any State that takes into consideration payments under the Act in accordance with the provisions of section 8009 in allocating State aid to LEAs must reimburse any LEA for any amounts taken into consideration for any fiscal year to the extent that the LEA did not in fact receive payments in those amounts during that fiscal year. (5) A State may not take into consideration payments under the Act or under Public Law 874 before the State's State aid program has been certified by the Secretary. (b) Data for determinations. (1) Except as provided in paragraph (b)(2) of this section, determinations under this subpart requiring the submission of financial or school population data must be made on the basis of final data for the second fiscal year preceding the fiscal year for which the determination is made if substantially the same program was then in effect. (2)(i) If the Secretary determines that the State has substantially revised its State aid program, the Secretary may certify that program for any fiscal year only if-- (A) The Secretary determines, on the basis of projected data, that the State's program will meet the disparity standard described in Sec. 222.162 for the fiscal year for which the determination is made; and (B) The State provides an assurance to the Secretary that, if final data do not demonstrate that the State's program met that standard for the fiscal year for which the determination is made, the State will pay to each affected LEA the amount by which the State reduced State aid to the LEA. (ii) Data projections submitted by a State must set forth the assumptions upon which the data projections are founded, be accompanied by an assurance as to their accuracy, and be adjusted by actual data for the fiscal year of determination that must be submitted to the Secretary as soon as these data are available. (c) Definitions. The following definitions apply to this subpart: (1) State aid means any contribution, no repayment for which is expected, made by a State to or on behalf of LEAs within the State for current expenditures for the provision of free public education. (2) Equalize expenditures means to meet the standard set forth in Sec. 222.162. (3) Current expenditures means the total charges incurred for the benefit of the school year in an elementary (including pre- kindergarten) or secondary school program. ``Current expenditures'' does not include-- (i) Expenditures for capital outlay; (ii) Expenditures for debt service for capital outlay; (iii) Expenditures from State sources for special cost differentials of the type specified in Sec. 222.162(c)(2); (iv) Expenditures of revenues from local or intermediate sources that are designated for special cost differentials of the type specified in Sec. 222.162(c)(2); (v) Expenditures of funds received by the agency under sections 8002 and 8003(b) (including hold harmless payments calculated under section [[Page 50798]] 8003(e)) or under Pub. L. 81-874 that are not taken into consideration under the State aid program and exceed the proportion of those funds that the State would be allowed to take into consideration under Sec. 222.163; or (vi) Expenditures of funds received by the agency under Pub. L. 81- 874 that were not taken into consideration under the State aid program and exceed the proportion of funds the State was permitted to take into consideration under that law. (4) Revenue means an addition to assets that does not increase any liability, does not represent the recovery of an expenditure, does not represent the cancellation of certain liabilities without a corresponding increase in other liabilities or a decrease in assets, and does not represent a contribution of fund capital in food service or pupil activity funds. Furthermore, the term ``revenue'' includes only revenue for current expenditures. (Authority: 20 U.S.C. 7709) Sec. 222.162 What disparity standard must a State meet in order to be certified and how are disparities in current expenditures or revenues per pupil measured? (a) Percentage disparity limitation. The Secretary will consider that a State aid program equalizes expenditures if the disparity in the amount of current expenditures or revenue per pupil for free public education among LEAs in the State is no more than 25 percent for fiscal years 1995, 1996, and 1997; and no more than 20 percent for fiscal years 1998 and 1999. In determining the disparity percentage, the Secretary shall disregard LEAs with per pupil expenditures or revenues above the 95th percentile or below the 5th percentile of those expenditures or revenues in the State. The method for calculating the percentage of disparity in a State is set forth in the appendix to this subpart. (b)(1) Weighted average disparity for different grade level groups. If a State requests it, the Secretary will make separate disparity computations for different groups of LEAs in the State that have similar grade levels of instruction. (2) In those cases, the weighted average disparity for all groups, based on the proportionate number of pupils in each group, may not be more than the percentage provided in paragraph (a) of this section. The method for calculating the weighted average disparity percentage is set out in the appendix to this subpart. (c) Per pupil figure computations. In calculating the current expenditures or revenue disparities under this section, computations of per pupil figures are made on one of the following bases: (1) The per pupil amount of current expenditures or revenue for an LEA is computed on the basis of the total number of pupils receiving free public education in the schools of the agency. The total number of pupils is determined in accordance with whatever standard measurement of pupil count is used in the State. (2) If a State aid program uses ``weighted pupil,'' ``classroom,'' ``instructional unit,'' or another designated measure of need in determining allocations of State aid to take account of special cost differentials, the computation of per pupil revenue or current expenditures may be made on those bases. The two allowable categories of special cost differentials are-- (i) Those associated with pupils having special educational needs, such as children with disabilities, economically disadvantaged children, non-English speaking children, and gifted and talented children; and (ii) Those associated with particular types of LEAs such as those affected by geographical isolation, sparsity or density of population, high cost of living, or special socioeconomic characteristics within the area served by an LEA. (d) Revenues and current expenditures included in determinations. All revenues or current expenditures must be included for each LEA in the State in determining the percentage of disparity under paragraph (a) of this section. (Authority: 20 U.S.C. 7709) Sec. 222.163 What proportion of Impact Aid funds may a State take into consideration upon certification? (a) Provision of law. Section 8009(d)(1)(B) provides that, upon certification by the Secretary, in allocating State aid a State may consider as local resources funds received under sections 8002 and 8003(b) (including hold harmless payments calculated under section 8003(e)) and Pub. L. 81-874 only in proportion to the share that local tax revenues covered under a State equalization program are of total local tax revenues. Determinations of proportionality must be made on a case-by-case basis for each LEA affected and not on the basis of a general rule to be applied throughout a State. (Authority: 20 U.S.C. 7709) (b) Computation of proportion. (1) In computing the share that local tax revenues covered under a State equalization program are of total local tax revenues for an LEA with respect to a program qualifying under Sec. 222.162, the proportion is obtained by dividing the amount of local tax revenues covered under the equalization program by the total local tax revenues attributable to current expenditures for free public education within that LEA. (2) In cases where there are no local tax revenues for current expenditures and the State provides all of those revenues on behalf of the LEA, the State may consider up to 100 percent of the funds received under the Act by that LEA in allocating State aid. (Authority: 20 U.S.C. 7709(d)(1)(B)) (c) Application of proportion to Impact Aid payments. Except as provided in Sec. 222.161(a)(1)(ii) and (iii), the proportion established under this section (or a lesser proportion) for any LEA receiving payments under sections 8002 and 8003(b) (including hold harmless payments calculated under section 8003(e)) and Pub. L. 81-874 may be applied by a State to actual receipts of those payments or payments under Pub. L. 81-874. (Authority: 20 U.S.C. 7709(d)(1)(B)) Sec. 222.164 What procedures does the Secretary follow in making a determination under section 8009? (a) Initiation. (1) A proceeding under this subpart leading to a determination by the Secretary under section 8009 may be initiated-- (i) By the State educational agency (SEA) or other appropriate agency of the State; (ii) By an LEA; or (iii) By the Secretary, if the Secretary has reason to believe that the State's action is in violation of section 8009. (2) Whenever a proceeding under this subpart is initiated, the party initiating the proceeding shall give adequate notice to the State and all LEAs in the State. (b) Submission. (1) A submission by a State or LEA under this section must be made in the manner requested by the Secretary and must contain the information and assurances as may be required by the Secretary in order to reach a determination under section 8009 and this subpart. (2)(i) A State in a submission shall-- (A) Demonstrate how its State aid program comports with Sec. 222.162; and (B) Demonstrate for each LEA receiving funds under the Act that the proportion of those funds that will be taken into consideration comports with Sec. 222.163. (ii) The submission must be received by the Secretary no later than 120 calendar days before the beginning of the State's fiscal year for the year of the determination, and must include (except as provided in Sec. 222.161(c)(2)) final second preceding fiscal year disparity data enabling the Secretary to determine whether the standard in Sec. 222.162 has been met. The submission is considered timely if received by the Secretary on or before the filing deadline or if it bears a U.S. Postal Service postmark dated on or before the filing deadline. [[Page 50799]] (3) An LEA in a submission must demonstrate whether the State aid program comports with section 8009. (4) Whenever a proceeding is initiated under this subpart, the Secretary may request from a State the data deemed necessary to make a determination. A failure on the part of a State to comply with that request within a reasonable period of time results in a summary determination by the Secretary that the State aid program of that State does not comport with the regulations in this subpart. (5) Before making a determination under section 8009, the Secretary affords the State, and all LEAs in the State, an opportunity to present their views. (c) Determinations. The Secretary reviews the participants' submissions and any views presented at a predetermination hearing under paragraph (b)(5) of this section, including views submitted during the post-hearing comment period. Based upon this review, the Secretary issues a written determination setting forth the reasons for the determination in sufficient detail to enable the State or LEAs to respond. The Secretary affords reasonable notice of a determination under this subpart and the opportunity for a hearing to the State or any LEA adversely affected by the determination. (Authority: 20 U.S.C. 7709) Note to Paragraph (b)(2) of this section: The U.S. Postal Service does not uniformly provide a dated postmark. Before relying on this method, an applicant should check with its local post office. Sec. 222.165 What procedures does the Secretary follow after making a determination under section 8009? (a) Request for hearing. (1) A State or LEA that is adversely affected by a determination under section 8009 and this subpart and that desires a hearing regarding that determination must submit a written request for a hearing within 30 days of receipt of the determination. The time within which a request must be filed may not be extended unless the Secretary, or the Secretary's delegatee, extends the time in writing at the time notice of the determination is given. (2) A request for a hearing in accordance with this section must specify the issues of fact and law to be considered. (3) If an LEA requests a hearing, it must furnish a copy of the request to the State. If a State requests a hearing, it must furnish a copy of the request to all LEAs in the State. (b) Right to intervene. Any LEA or State that is adversely affected by a determination shall have the right of intervention in the hearing. (c) Time and place of hearing. The hearing is held at a time and place fixed by the Secretary or the Secretary's delegatee (with due regard to the mutual convenience of the parties). (d) Counsel. In all proceedings under this section, all parties may be represented by counsel. (e) Proceedings. The Secretary refers the matter in controversy to an administrative law judge (ALJ) appointed under 5 U.S.C. 3105. (f) Filing requirements. (1) Any written submission under this section must be filed by hand-delivery, mail, or facsimile transmission. The Secretary discourages the use of facsimile transmission for documents longer than five pages. (2) If agreed upon by the parties, service of a document may be made upon the other party by facsimile transmission. (3) The filing date for a written submission under this section is the date the document is-- (i) Hand-delivered; (ii) Mailed; or (iii) Sent by facsimile transmission, followed by a mailed hard copy. (4) A party filing by facsimile transmission is responsible for confirming that a complete and legible copy of the document was received by the Department. (g) Procedural rules. (1) If, in the opinion of the ALJ, no dispute exists as to a material fact the resolution of which would be materially assisted by oral testimony, the ALJ shall afford each party to the proceeding an opportunity to present its case-- (i) In whole or in part in writing; or (ii) In an informal conference after affording each party sufficient notice of the issues to be considered. (2) With respect to hearings involving a dispute as to a material fact the resolution of which would be materially assisted by oral testimony, the ALJ shall afford the following procedures to each party: (i) Sufficient notice of the issues to be considered at the hearing. (ii) An opportunity to make a record of the proceedings. (iii) An opportunity to present witnesses on the party's behalf. (iv) An opportunity to cross-examine other witnesses either orally or through written interrogatories. (h) Decisions. The ALJ shall make an initial decision based upon written findings, which shall be forwarded to the Secretary. The Secretary may, by appropriate notification to the parties, determine to review it or certify it as the final decision of the Secretary without further proceedings. Written notice of the initial decision shall be sent to all parties. In any case in which the Secretary modifies or reverses the initial decision, a notice of that action shall be accompanied by a written statement of the grounds for the reversal or modification. Notice of the final decision of the Secretary is served upon all parties to the hearing, the hearing panel and any LEA that may be adversely affected. (Authority: 20 U.S.C. 7709 and 7711) (i) Corrective Action. (1) Within 30 days after a determination by the Secretary that a State has been in violation of section 8009 unless the determination is timely appealed by the State, the State shall provide satisfactory written assurances that it will undertake appropriate corrective action if necessary. (2) A State found by the Secretary to have been in violation of section 8009 following a hearing shall provide, within 30 days after disposal of the hearing request (such as by a final decision issued under this subpart or withdrawal of the hearing request), satisfactory assurances that it is taking corrective action, if necessary. (3) At any time during a hearing under this subpart, a State may provide the Secretary appropriate assurances that it will undertake corrective action if necessary. The Secretary or the ALJ, as applicable, may stay the proceedings pending completion of corrective action. (Authority: 20 U.S.C. 7709) Secs. 222.166-222.169 [Reserved] Appendix to Subpart K Determinations Under Section 8009 of the Act--Methods of Calculations for Treatment of Impact Aid Payments Under State Equalization Programs The following paragraphs describe the methods for making certain calculations in conjunction with determinations made under the regulations in this subpart. Except as otherwise provided in the regulations, these methods are the only methods that may be used in making these calculations. 1. Determinations of disparity standard compliance under Sec. 222.162(b)(1). (a) The determinations of disparity in current expenditures or revenue per pupil are made by-- (i) Ranking all LEAs having similar grade levels within the State on the basis of current expenditures or revenue per pupil for the second preceding fiscal year before the year of determination; (ii) Identifying those LEAs in each ranking that fall at the 95th and 5th percentiles of the total number of pupils in attendance in the schools of those LEAs; and (iii) Subtracting the lower current expenditure or revenue per pupil figure from the higher for those agencies identified in paragraph (ii) and dividing the difference by the lower figure. Example: In State X, after ranking all LEAs organized on a grade 9-12 basis in order of the expenditures per pupil for the fiscal year in question, it is ascertained by counting the number of pupils in attendance in those agencies in ascending order of expenditure that the 5th percentile of student population is reached at LEA A with a per pupil expenditure of $820, and that the 95th percentile of student population is reached at [[Page 50800]] LEA B with a per pupil expenditure of $1,000. The percentage disparity between the 95th and 5th percentile LEAs is 22 percent ($1,000-$820 = $180/$820). The program would meet the disparity standard for fiscal years before fiscal year 1998 but would not for subsequent years. (b) In cases under Sec. 222.162(b), where separate computations are made for different groups of LEAs, the disparity percentage for each group is obtained in the manner described in paragraph (a) above. Then the weighted average disparity percentage for the State as a whole is determined by-- (i) Multiplying the disparity percentage for each group by the total number of pupils receiving free public education in the schools in that group; (ii) Summing the figures obtained in paragraph (b)(i); and (iii) Dividing the sum obtained in paragraph (b)(ii) by the total number of pupils for all the groups. Example ------------------------------------------------------------------------ ------------------------------------------------------------------------ Group 1 (grades 1-6), 80,000 pupils x 18.00%=.................. 14,400 Group 2 (grades 7-12), 100,000 pupils x 22.00%=................ 22,000 Group 3 (grades 1-12), 20,000 pupils x 35.00%=................. 7,000 -------- Total 200,000 pupils....................................... 43,400 43,400/200,000=21.70% Disparity ------------------------------------------------------------------------ 2. Determinations under Sec. 222.163(b) as to maximum proportion of payments under the Act that may be taken into consideration by a State under an equalization program. The proportion that local tax revenues covered under a State equalization program are of total local tax revenues for a particular LEA shall be obtained by dividing: (a) The amount of local tax revenues covered under the equalization program by (b) the total local tax revenues attributable to current expenditures within the LEA. Local revenues that can be excluded from the proportion computation are those received from local non-tax sources such as interest, bake sales, gifts, donations, and in-kind contributions. Examples Example 1. State A has an equalization program under which each LEA is guaranteed $900 per pupil less the LEA contribution based on a uniform tax levy. The LEA contribution from the uniform tax levy is considered under the equalization program. LEA X contributes the proceeds of the uniform tax levy, $700 per pupil, and the State contributes the $200 difference. No other local tax revenues are applied to current expenditures for education by LEA X. The percentage of funds under the Act that may be taken into consideration by State A for LEA X is 100 percent ($700/$700). If LEA X receives $100 per pupil in payments under the Act, $100 per pupil may be taken into consideration by State A in determining LEA X's relative financial resources and needs under the program. LEA X is regarded as contributing $800 and State A would now contribute the $100 difference. Example 2. The initial facts are the same as in Example 1, except that LEA X, under a permissible additional levy outside the equalization program, raises an additional $100 per pupil not covered under the equalization program. The permissible levy is not included in local tax revenues covered under the equalization program but it is included in total local tax revenues. The percentage of payments under the Act that may be taken into consideration is 87.5 percent ($700/$800). If LEA X receives $100 per pupil in payments under the Act, $87.50 per pupil may be taken into consideration. LEA X is now regarded as contributing $787.50 per pupil under the program and State A would now contribute $112.50 per pupil as the difference. Example 3. State B has an equalization program under which each LEA is guaranteed $900 per pupil for contributing the equivalent of a two mill tax levy. LEA X contributes $700 per pupil from a two mill tax levy and an additional $500 per pupil from local interest, bake sales, in-kind contributions, and other non-tax local sources. The percentage of funds under the Act that may be taken into consideration by State A for LEA X is 100 percent ($700/$700). The local revenue received from interest, bake sales, in-kind contributions and other non-tax local revenues are excluded from the computation since they are from non-tax sources. If LEA X receives $100 per pupil in payments under the Act, $100 per pupil may be taken into consideration by State A in determining LEA X's relative financial resources and needs under the program. LEA X is regarded as contributing $800 and State A would now contribute the $100 difference. Example 4. State C has an equalization program in which each participating LEA is guaranteed a certain per pupil revenue at various levels of tax rates. For an eight mill rate the guarantee is $500, for nine mills $550, for 10 mills $600. LEA X levies a 10 mill rate and realizes $300 per pupil. Furthermore, it levies an additional 10 mills under a local leeway option realizing another $300 per pupil. The $300 proceeds of the local leeway option are not included in local tax revenues covered under the equalization program, but they are included in total local tax revenues. The percentage of payments under the Act that may be taken into consideration is 50 percent ($300/$600). If LEA X receives $100 per pupil in payments under the Act, $50 per pupil may be taken into consideration. LEA X may be regarded as contributing $350 per pupil under the program and State B would now contribute $250 as the difference. Example 5. The initial facts are the same as in Example 4, except that LEA Y in State C, while taxing at the same 10 mill rate for both the equalization program and leeway allowance as LEA X, realizes $550 per pupil for each tax. As with LEA X, the percentage of payments under the Act that may be taken into consideration for LEA Y is 50 percent (550/1100). If LEA Y receives $150 per pupil in payments under the Act, then up to $75 per pupil normally could be taken into consideration. However, since LEA Y would have received only $50 per pupil in State aid, only $50 of the allowable $75 could be taken into consideration. Thus, LEA Z may be regarded as contributing $600 per pupil under the program and State B would not contribute any State aid. [FR Doc. 95-24216 Filed 9-28-95; 8:45 am] BILLING CODE 4000-01-P